Explore whether retiring early is right for you and learn how to access your retirement money early.
2 ways to use retirement money early

As you approach retirement, you may find that you’re in a comfy spot and want to retire early. But how can you enjoy an early retirement before you can access 401(k)s and IRAs penalty-free at 59½? The best way is to have savings invested in a taxable account. If you don’t, there are other ways to enjoy an early retirement—as long as you’re confident your financial situation allows for it! Take a look at some different ways to access your retirement money early without triggering a 10% early withdrawal penalty. We’ll cover:
- SEPPs
- The Rule of 55
SEPPs
Substantially equal periodic payments, or SEPPs, is a withdrawal option starting before age 59½ and lasting either until age 59½ or 5 years, whichever is later. While calculating your withdrawal amount can be a little complicated, be sure to do it correctly to avoid penalties. Let’s break down the 3 decisions you have to make if you choose SEPPs.
Decision 1: Choosing how to calculate the amount you take
First, you’ll need to pick a formula to calculate your withdrawal. Here are 3 methods to try:
Decision 2: Choosing a method of determining your life expectancy
The decision you make will affect the amount of your SEPPs as well as the strategies that are available to you in the future. You can choose from 1 or more of these tables depending on your beneficiary designations and the calculation method you chose.
Decision 3: Choosing your interest rate
If you chose the fixed amortization or fixed annuitization formula, you’ll need to choose an interest rate. You can choose whatever rate you want, as long as it doesn’t exceed the greater of 5% or 120% of the mid-term applicable federal rate. Just keep in mind that the higher the interest rate, the higher the withdrawal amount.
For more info on how to accurately calculate SEPPs, these FAQs from the IRS can help.
Remember: If you miss a payment, it’ll affect your current SEPP and retroactively penalize any other SEPPs before 59½, so always be sure to make payments on time.
The Rule of 55
55 may just become your new favorite number. If you’re looking to retire early, this might be a great option. The Rule of 55 is simple: If you leave your employer on or after the year you turn 55, you can begin taking withdrawals from your 401(k) for 403(b) from that employer.
The Rule of 55 is often seen as more flexible, easier-to-implement alternative to SEPPs for those who qualify. Here’s a closer look at what that means:
Curious about Personal Advisor?
Get to know us, and find out what to expect if you enroll.
We may also send you other Vanguard information you might be interested in. You can opt out at any time.