Ways To Get Your Retirement Money Early Without Penalties

It's important for seniors to leave their retirement accounts

, such as employer-sponsored plans or IRAs, untouched before the age of retirement. There are rules the government enforces that discourage early withdrawals, with distribution tax or penalties being one of them. However, if it's extremely necessary that you dip into your retirement plan ahead of its maturity, you can avoid the penalty using a number of methods.

If you start withdrawing from your retirement plan in equal yearly amounts, with the payment scheme designed over the rest of your life, or yours and your plan beneficiary's, the distributions won't be subjected to the penalty. This option is arguably the best one if you need to withdraw funds early on.

If you leave work after 55, you won't have to pay the penalty for early distribution on what you're going to get from the retirement plan sponsored by your former employer, although you'll have to pay the necessary income tax. You don't need to retire permanently, though. You can go back to the same company later, or work for another company.

An ESOP, or Employer Stock Ownership Plan, is a stock bonus program which can be similar to traditional pension plans. Employer stock mainly or wholly funds these plans, which allow tax-free cash distributions of the dividends as long as the worker can receive payments in employer stock.

Aside from ESOPs, equal yearly distributions, and leaving work after 55, withdrawing from a retirement plan before the age of retirement for your medical expenses, or those of your spouse or offspring, can also give you a tax exemption, although it will only be on a part of the distribution. While the penalties for early distribution are there to encourage seniors to save up for their retirement, it is possible to withdraw funds without penalties if you absolutely have to tap into your plan before normal retirement age. Contact your tax advisor or financial planner for help on how to get the most out of your retirement plan.

by: Carina Smith

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