Whether you choose to retire early, or are forced to quit working due to health or personal issues, these circumstances force you to look at your finances and find a way to tap your retirement money early. You can, of course, sign up for Social Security benefits when you reach 62, but you can tap other retirement assets before you reach that age. Taking a good look at the assets you've accumulated. Determining how and when to tap them can make your retirement years more comfortable.
Gather all your financial statements, including information about your 401k, and any IRA accounts you might have. Determine how much you have in these asset classes. You can begin to tap the assets in your 401k and IRA when you reach age 59 1/2, with no penalties, and without making any special arrangements.
Contact the administrator of your plan if you're under 59 1/2 and still need to tap the money in your retirement accounts. Tell the administrator that you want to withdraw your money under the 72t provision. This provision allows you to make substantial, equal withdrawals from your retirement accounts prior to 59 1/2 without incurring a tax penalty. The amount you can withdraw is determined by your age and your life expectancy. The IRS uses a special formula, based on the same kinds of actuarial tables used by insurance companies, to determine your life expectancy and the percentage you're allowed to withdraw under the 72t provision. Younger people are likely to find that they can withdraw only a small percentage of their balance each year.
Work with a CPA or tax expert to work out a withdrawal plan under the 72t provision. Your accountant or tax expert can help you determine how much you can withdraw from your retirement accounts without incurring a tax penalty. Once you have the 72t plan in place, you must maintain those withdrawals for at least five years, or until you reach age 59 1/2, whichever is longer.