Early Withdrawal Strategist

The IRS rules for retirement-account withdrawals before age 59½ sound simple: 10% penalty on top of regular income tax. But the IRS also wrote three exemptions into the code that early retirees can stack:

1. Rule of 55. If you separate from your employer in or after the year you turn 55 (50 for public safety workers), you can withdraw from that specific employer's 401(k) or 403(b) without the 10% penalty. Doesn't apply to old 401(k)s from previous jobs unless you've rolled them into the current employer's plan. Doesn't apply to IRAs.

2. 72(t) SEPP (Substantially Equal Periodic Payments). The IRS lets you take penalty-free withdrawals from any IRA or 401(k) if you commit to a structured payment schedule. Three calculation methods — RMD, Amortization, Annuitization — produce different annual amounts. Once started, payments must continue for at least 5 years OR until age 59½, whichever is longer. Modifying or stopping triggers retroactive 10% penalties on every prior distribution. Powerful but rigid.

3. Roth Conversion Ladder. Convert Trad IRA dollars to Roth during low-income early-retirement years (pay tax at low brackets). Each conversion has a 5-year clock; once it expires, those converted dollars come out tax-free and penalty-free. Stack 5 years of conversions and you have a rolling penalty-free pipeline. Requires a taxable account to bridge the first 5 years.

Most early retirees use a combination: Rule of 55 for the first few years if eligible, Roth Ladder building in parallel, taxable account smoothing the gaps. SEPP is the fallback when neither of the others fits. The math on which combination is right depends on your specific balances and target spending — that's what this tool resolves.