Are you thinking about taking an early retirement? If so, you’re not alone. Many people want to “jump ship” from the daily grind and really live life while they’re younger than 65. Of course, retiring early means you have to have plenty of money saved up in order to do it comfortably – life costs a lot of money no matter how old you are. In fact, it might cost more on average when you’re older because you need more help with things. One way that many people plan for early retirement is through the very popular savings vehicle of a Roth IRA. Like the regular IRA and the 401k, the Roth IRA was created specifically for retirement savings.
With a Roth IRA, you can access the amount of money you’ve contributed to it at any time. So if, for example, you’ve been putting in $1,000 per month, you can access the total of your contributions at any age. Since a Roth IRA is an investment fund, the money you put into it should grow as the money is invested.
Qualification from Withdrawing from Your Roth IRA
When it comes to withdrawing from your Roth IRA early, however, that’s a different story: You have to wait five years from the year in which you opened your account. You must also meet one of the following qualifications:
- Be 59.5 years or older.
- The withdrawal is for your beneficiary after you die.
- You have become disabled.
- You need the money for higher education costs and student loans won’t cover it all.
- You have medical expenses which aren’t covered by your health insurance.
- You are a first-time home buyer and need it for a down payment: the bigger the down, the better your mortgage rate.
- You plan on making substantially equal payments (SEPP).
Roth IRA accounts are flexible investment vehicles and make for a very smart complement to your early retirement dreams. Before you definitively retire early, consult with a financial advisor to make sure you are making the right decisions.