Are you thinking about retiring early? Maybe you’ve accumulated enough savings to retire in your 50s. Or maybe you’re facing a health issue or job loss that’s pushing you into retirement. No matter the reason, early retirement can present a number of unique challenges.
One of the biggest issues that early retirees face is taking distributions from their qualified retirement accounts, such as IRAs and 401(k) plans. These accounts are tax-deferred, which means there are no taxes on growth as long as the funds stay inside the account. However, distributions may be taxed as income. Additionally, if you withdraw funds from a 401(k) or an IRA before age 59½, you could face a 10 percent early distribution penalty.
Does a significant portion of your retirement assets exist within your 401(k) plan? If so, you’re not alone. Many workers use their 401(k) as their primary retirement-saving vehicle for a number of reasons. You get tax-deferred growth inside a 401(k) plan. You also may get matching contributions from your employer. Those two components can make a 401(k) a powerful accumulation vehicle.
Retirement isn’t only about asset accumulation, though. You certainly need to save a substantial amount of money to fund a long retirement. However, you also need to make that money last. Your retirement could last several decades. If you aren’t disciplined with your spending and money management, your 401(k) funds may not last the long haul.
Did you just switch jobs? If so, this is probably a busy and exciting time. You have to adjust to your new company and role and possibly change your daily routine. You might have even accepted a job in a new part of the country or in a brand-new industry. Switching jobs can be stressful and chaotic, but it’s also a common part of today’s economy.
If you and your spouse or partner fight about money, you’re not alone. According to a study from SunTrust Bank, 35 percent of couples experiencing stress said that money was the primary source of conflict. For respondents age 44 to 54, 44 percent blamed money for their relationship challenges.1