Suze Orman

Retirement Planning

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Early Retirement

Retirement doesn't necessarily mean sixty-five anymore. Retirement now can mean fifty to fifty-five years of age, when you could be offered early retirement!

If you are fifty-five years of age or older in the year of your retirement, you can withdraw any or all of the money, whenever you wish, from your qualified retirement plan without any penalties whatsoever. This rule of "fifty-five and over" pertains only to money in employee qualified plans, not for any other retirement account, such as an IRA, an IRA rollover, or SEP/IRA.


If you are 55 or older and transfer your funds from your qualified plan into an IRA rollover, you will also transfer away the right to access these funds at convenience without penalty until you turn 59 1/2 unless you take substantially equal periodic payments.

If you are not or will not be fifty-five in the year of your retirement, the best way to avoid penalties, if you need to access those funds, is by rolling over your funds into an IRA rollover and taking substantially equal periodic payments.

If you are presented with an early retirement offer, the following guidelines will help you in deciding if you can retire.

Tip: If you are taking early retirement because your spouse or partner's earnings cover your financial needs and you are dependent on those earnings, you should consider purchasing a "level term" life insurance policy on him or her to protect you in case anything happens to your spouse or partner if he or she is not already adequately insured. (You will need the policy only for the number of years your spouse or partner plans to work. If he or she will retire in ten years, take out a ten-year policy.)

Tip: Most early retirement health benefit offers will not include dental or optical care. If your company now covers these two and if early retirement is in the air, get all your dental and optical work completed beforehand.

Tip: At age 70 1/2 you are required to start withdrawing funds if you have not already done so.

Tip: If you and your spouse have set up a living trust (hold your assets in trust), make sure the primary beneficiary named on all your retirement accounts is the individual name of your spouse and not the trust. If you name the trust as the primary beneficiary, it will be subjected to the same rules as a nonspouse and the account will have to be wiped clean within five years. The trust should be named the contingent beneficiary only.

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