Personally I like the stories. I just figured if someone doesn’t they can just fast forward or use the chapters to get right to the content. Everyone gets what they want!
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.
@@LiamOlivia-4 The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?
more and more of my colleagues are retiring early via the Rule of 55 on their 401k because they've paid down their expenses - no mortgage, no car loans, no credit card debt, and their kids are independent. poor on paper, staying within the 12% tax bracket, using HSAs to help pay their health care costs, and maybe even getting an ACA subsidy. some of these folks who have to keep working, etc... are their expenses totally out of whack or what? thanks for this content, Ari. keep 'em coming!
Great video Ari! Important to note that, to use the rule of 55, one should check if their 401k plan allows for partial distributions after separating from the company. Many plans don’t allow it and only allow for a total distribution (or total rollover) or to keep it in the plan, which negates the ability of using the rule of 55 (which only says you would not have a 10% penalty IN THE EVENT THAT YOU COULD take a distribution).
Ari, thank you so much, I stumbled on your channel two weeks ago and have watched more than 10 episode already. Everything you covered is very educational and I love the story and the different scenario. Please keep doing what you’re doing.
I’ve been listening to SO many money, wealth, and retirement podcasts for a year now and they never seem applicable to us! We have a high NW and want to retire at 53. Trying to figure out tax issues, healthcare costs, withdrawal approaches, etc. Your podcast is perfect! Though I do get confused sometimes when you go to fast explaining one thing, then spend too long (going on a tangent) on the next. But I just google if I don’t understand something!
(Long message incoming) Ironically I often fall asleep listening to your videos at night as a replacement to scrolling less educational content on tiktok/instagram etc. Just listened again (writing this in the morning as I realized I didn’t get to listen to the whole thing)😂 I wonder what % of your demographic is unmarried, younger men. Love the stories about “John” and “Sue” who are 52, 55, 60+, etc, and definitely still learn from them, but wonder if you have any stories to share about 35, 40, or 45 yr old early retirees. I was having a convo with a friend about how we might be the most financially literate generation (access to free educational content is everywhere) but temptations (meme stocks, crypto, gambling, etc) has never been higher. What do you think? All the best Ari
Excellent Ari! Great vid, good concise info. It seems to me with 100,000 income need there's plenty of room in the 22% tax bracket for roth conversions.
If you are 50 and don’t know when you’ll retire but know it’s imminent, would it still be best to feed into a 401k and trigger t72 later….because feeding into 401k ensures you’re not paying tax yet and if you have To retire you can plan your t72 distribution to be at low tax bracket until age 59.5?
I can see why ACA is more expensive for someone with w2 income but it seems unfair to penalize someone with income from a 401k. Aca and Irmaa are both hidden taxes that penalize savers. So yes your federal/state tax rate may be lower in retirement but be sure to add on the hidden tax. It may tilt the game in favor of a Roth. Especially if you are single and have a ridiculously low upper bound where healthcare becomes a lot more expensive.
Thanks for all the great content! If I change jobs before before I'm 55 and transfer my old 401k into my new one, does the Rule of 55 apply to all of the funds?
You’re welcome. No, moving your 401k to a new employer's plan won't allow you to use the rule of 55 with that money. The rule of 55 applies to distributions from your current employer's 401k plan if you separate from service (leave the job) in or after the year you turn 55. Moving your 401k to a new employer makes it a rollover contribution into a different plan, and it wouldn't be considered funds from your current employer's plan anymore.
Ari, that is an answer that is almost impossible to find anywhere, and I’ve seen some conflicting info out there, even from trustworthy sources. Can you deal with that specifically on a video regarding this topic, or maybe even a blog post/article somewhere (so it’s more Google searchable)? Thanks so much for all the great information!
I have a question that might actually happen to an ex-coworker at another institution. He is currently 53 in 2024 and it seems likely he will be laid off in 2025 due to the company streamlining and closing down multiple offices to consolidate to core buildings in a few cities. This person has 27 years at the company and a $1.4M 401K. If laid off, this person would get a 60-day working notice and then 12 months of severance. By the time severance ended, he would be 55. Does that still count or would he have to find a job while on severance and roll the 401k over to the new job so he could retire from the new job with rule of 55. That would increase his income significantly by double-dipping severance for a year. I haven't seen a good answer to this. Thanks. Also, from what I understand, you can still get a new job after you retire.
What if a large portion of your 401K is in roth at the age of 55? Couldn't you just draw from your pre-tax Funds up to the tax bracket you're comfortable with and then make up the difference from the roth funds? I understand why the brokerage account is so valuable before 55, but after 55 I think this would be optimal right?
Can you do a 72t from an annuity? Say you have a lifetime income rider, can you turn that on before 59.5 from an annuity and not get hit with penalties?
Careful. I think the rule of 55 only keeps you from the 10% penalty. The rules for a tax free Roth are still 59.5. So I believe you’ll have to pay income tax on it.
@@mbmatt100I did a bit of research and it sounds like the Roth contributions are still tax free, but the Roth earnings would be subject to income tax.
@@colbyharder4733 yes. I agree, the contribution would be tax free. Only the earnings would be taxed if before 59.5. I didn’t consider you were only talking about taking out the contributions. Good call out.
Is capital gains tax preferential to ordinary income even residing in CA ? I thought capital gains tax is close to 35-40% with federal and state combined?
Like most videos and articles about the rule of 55, you skip over the pointing out that some 401(k) plans will NOT let you take distributions under the rule of 55. You mention "most" plans do when it would be a better video to point out that some don't and you can't take it for granted.
Personally I like the stories. I just figured if someone doesn’t they can just fast forward or use the chapters to get right to the content. Everyone gets what they want!
Pleased to hear it!
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.
@@LiamOlivia-4 That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well
@@IbrahimIsabella-00 My advisor is MARGARET MOLLI ALVEY;
You can look her up online
@@LiamOlivia-4 The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?
more and more of my colleagues are retiring early via the Rule of 55 on their 401k because they've paid down their expenses - no mortgage, no car loans, no credit card debt, and their kids are independent. poor on paper, staying within the 12% tax bracket, using HSAs to help pay their health care costs, and maybe even getting an ACA subsidy. some of these folks who have to keep working, etc... are their expenses totally out of whack or what?
thanks for this content, Ari. keep 'em coming!
Thank you!!
Great video Ari! Important to note that, to use the rule of 55, one should check if their 401k plan allows for partial distributions after separating from the company. Many plans don’t allow it and only allow for a total distribution (or total rollover) or to keep it in the plan, which negates the ability of using the rule of 55 (which only says you would not have a 10% penalty IN THE EVENT THAT YOU COULD take a distribution).
Yes!!
Ari, thank you so much, I stumbled on your channel two weeks ago and have watched more than 10 episode already. Everything you covered is very educational and I love the story and the different scenario. Please keep doing what you’re doing.
Thank you so much for this comment! So glad
Thanks Ari. I needed to hear these downsides. Time to focus on my brokerage account.
You’re very welcome
I’ve been listening to SO many money, wealth, and retirement podcasts for a year now and they never seem applicable to us! We have a high NW and want to retire at 53. Trying to figure out tax issues, healthcare costs, withdrawal approaches, etc. Your podcast is perfect! Though I do get confused sometimes when you go to fast explaining one thing, then spend too long (going on a tangent) on the next. But I just google if I don’t understand something!
Thank you for your feedback! I don’t take it lightly
Thanks Ari for another very informative video! I always enjoy your stories and humor so keep on doing it.
You’re so welcome!!
Thank you! Will check out Neil.
Thanks Ari. I’ve started to shift that savings from 401K to brokerage.
Glad it helped :)
(Long message incoming) Ironically I often fall asleep listening to your videos at night as a replacement to scrolling less educational content on tiktok/instagram etc. Just listened again (writing this in the morning as I realized I didn’t get to listen to the whole thing)😂 I wonder what % of your demographic is unmarried, younger men. Love the stories about “John” and “Sue” who are 52, 55, 60+, etc, and definitely still learn from them, but wonder if you have any stories to share about 35, 40, or 45 yr old early retirees. I was having a convo with a friend about how we might be the most financially literate generation (access to free educational content is everywhere) but temptations (meme stocks, crypto, gambling, etc) has never been higher. What do you think? All the best Ari
Thank you for addressing a question I’ve had about continuing to max 401k, catch-up, HSA and Roth or put some in a brokerage account. Great content.
You’re so welcome!!
Excellent Ari! Great vid, good concise info. It seems to me with 100,000 income need there's plenty of room in the 22% tax bracket for roth conversions.
Glad it was helpful!
I agree with that one guy. Please just get to the point. Have story time at the end.
If you are 50 and don’t know when you’ll retire but know it’s imminent, would it still be best to feed into a 401k and trigger t72 later….because feeding into 401k ensures you’re not paying tax yet and if you have To retire you can plan your t72 distribution to be at low tax bracket until age 59.5?
I can see why ACA is more expensive for someone with w2 income but it seems unfair to penalize someone with income from a 401k. Aca and Irmaa are both hidden taxes that penalize savers. So yes your federal/state tax rate may be lower in retirement but be sure to add on the hidden tax. It may tilt the game in favor of a Roth. Especially if you are single and have a ridiculously low upper bound where healthcare becomes a lot more expensive.
Thanks for all the great content! If I change jobs before before I'm 55 and transfer my old 401k into my new one, does the Rule of 55 apply to all of the funds?
You’re welcome.
No, moving your 401k to a new employer's plan won't allow you to use the rule of 55 with that money.
The rule of 55 applies to distributions from your current employer's 401k plan if you separate from service (leave the job) in or after the year you turn 55. Moving your 401k to a new employer makes it a rollover contribution into a different plan, and it wouldn't be considered funds from your current employer's plan anymore.
Great question and thanks for answering Ari
Ari, that is an answer that is almost impossible to find anywhere, and I’ve seen some conflicting info out there, even from trustworthy sources. Can you deal with that specifically on a video regarding this topic, or maybe even a blog post/article somewhere (so it’s more Google searchable)? Thanks so much for all the great information!
I have a question that might actually happen to an ex-coworker at another institution. He is currently 53 in 2024 and it seems likely he will be laid off in 2025 due to the company streamlining and closing down multiple offices to consolidate to core buildings in a few cities. This person has 27 years at the company and a $1.4M 401K. If laid off, this person would get a 60-day working notice and then 12 months of severance. By the time severance ended, he would be 55. Does that still count or would he have to find a job while on severance and roll the 401k over to the new job so he could retire from the new job with rule of 55. That would increase his income significantly by double-dipping severance for a year. I haven't seen a good answer to this. Thanks. Also, from what I understand, you can still get a new job after you retire.
What if a large portion of your 401K is in roth at the age of 55? Couldn't you just draw from your pre-tax Funds up to the tax bracket you're comfortable with and then make up the difference from the roth funds? I understand why the brokerage account is so valuable before 55, but after 55 I think this would be optimal right?
Not all (most don’t) have significant Roth - but that’s great for you!!
Can you do a 72t from an annuity? Say you have a lifetime income rider, can you turn that on before 59.5 from an annuity and not get hit with penalties?
Very interesting content, would like to hear what you have to say about my financial situation . How can I get connect with you
I'm glad! You can do so here: vwo3759x8i7.typeform.com/earlyretirement?typeform-source=www.buzzsprout.com
If you withdraw money from a Roth 401K using the Rule of 55, it won't increase your taxable income, right?
Careful. I think the rule of 55 only keeps you from the 10% penalty. The rules for a tax free Roth are still 59.5. So I believe you’ll have to pay income tax on it.
What’s all required to start a 72t. Do you have to apply for it? Or do you just file a form 5329 with your taxes every year. Thanks
@@mbmatt100I did a bit of research and it sounds like the Roth contributions are still tax free, but the Roth earnings would be subject to income tax.
@@colbyharder4733 yes. I agree, the contribution would be tax free. Only the earnings would be taxed if before 59.5. I didn’t consider you were only talking about taking out the contributions. Good call out.
five-year rule applies to the Roth 401k funds. Congress fixed the other problem with Secure 2.0
Is capital gains tax preferential to ordinary income even residing in CA ? I thought capital gains tax is close to 35-40% with federal and state combined?
I don't quite understand why have to pick between Rule of 55 OR cool tax planning. I intend to do both.
You can do both!!
Can you do visuals with actual numbers?
I do make case study videos where I go over a real-life case study of my clients; they're packed with numbers and scenarios.
Like most videos and articles about the rule of 55, you skip over the pointing out that some 401(k) plans will NOT let you take distributions under the rule of 55. You mention "most" plans do when it would be a better video to point out that some don't and you can't take it for granted.
Great point and every plan is different
Hurry up