BOSTON (CBS) - Age 55 seems to be a magical number. It's the elusive goal for retiring early! I co-authored The Complete Idiot's Guide to Retiring Early, and most workers under 40 we interviewed wanted to be retired by age 55. They were sure they would be debt free by age 55.
Key Retirement Birthdays: Double Digits, 55
But what we found in our research was that even though 55 was their goal very few individuals could realize an early retirement.
Many were still paying off school loans for the kids, their mortgage or credit card debt and the biggest reason was they simply had not saved enough to last them possibly another 35 years.
And you can't begin to collect Social Security until you are 62 unless you are disabled or widowed. And at age 62 you can't collect your full benefit.
Normally you cannot get at your retirement money before age 59½ without incurring a 10% penalty. Ten percent is a lot of money to pay to use your own money.
If your 55th birthday has come and gone and you leave your company for whatever reason leave the money in your 401(k) if it is over $5,000.
You can qualify for penalty free withdrawals from your 401(k) plan before age 59½. If you leave your job in the year you turn 55 or are older, but have not reached age 59½ you can have access to those dollars in your retirement plan penalty free but not tax free. This also works if you have a 403(b) plan.
This only works for the plan of your current employer and not a previous employer's retirement plan unless you were over 55 when you left there.
If you do retire, whether formally or because you can't find another job at age 55, use the dollars in your non-retirement accounts first so the dollars in the retirement accounts have longer to work for you tax deferred. The longer you can leave them in the retirement plan where they can grow tax-deferred the more you will have.
One more thing: From bankate.com 401(k) rules:
- If your account holds less than $1,000, your employer is allowed to automatically cash out your account when you leave.
- If your account holds between $1,000 and $5,000, most employers will automatically roll your 401(k) into an IRA when you leave your job.
- If your account holds more than $5,000, you must decide whether to leave your money behind or take it with you.
You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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