Getting at it early

Retirement accounts carry a 10% penalty on withdrawals before age 59½, on top of income tax. That is the wall early retirees hit: they have the money and are not allowed to spend it.

Section 72(t) is the official way through. Take substantially equal periodic payments on a fixed schedule and the penalty is waived. The price is rigidity — once started you must continue for five years or until 59½, whichever is longer, and breaking the schedule triggers the penalty retroactively on everything already taken. Splitting the IRA first, so only what you need sits inside the schedule, is usually the most useful move available.

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