Early Retirement Can Cost You Money

Simple IRAs are a great way to start saving for your retirement. Many small businesses offer these plans to their employees, which is a great incentive for keeping quality employees with the company. Simple IRAs have various great advantages, but few people stop to consider what early retirement can mean with a plan like this. How your decision to retire early can affect you will depend on the time you have had your plan. Whether it has been two years or less or more than two years since initial setup will make a big difference.

Within 2 Years of Initial Setup Your decision about retirement savings is an important one. And it is more important when you join your employer's Simple IRA plan. If you decide on early retirement within the first two years after joining, you may find it difficult to take out your money without penalties. With many other retirement programs there is a flat 10% fee for withdrawing money early from the account. However, with a Simple you get whacked with a 25% penalty if you withdraw early. That is, within the first two years after you set up the account. This is much money to give up, and the 25% does not even include the taxes you will have to pay on the money you withdraw.

After 2 Years If you have had your Simple IRA for more than two years after the initial setup, it is much easierto deal with if you decide on early retirement. After the two years are up, you can take out your retirement money early and you will only have to pay the 10% penalty fee for early withdrawal. This is much better than the 25% that you have to pay if you take it out before the two year period is up. Of course, saving for retirement is a long-term goal, and most people would not want an early withdrawal because of retirement.

Before early retirement it is important that you take all aspects of your retirement into consideration. Since you have to pay a 25% penalty on early withdrawal before your two years is up, you may want to wait until the two year period is over to withdraw your money from the plan. Even if you wait until after the two years is up, you will still have to pay the 10% early withdrawal penalty. So, you may want to let that money sit in the plan to earn more money so you can take out the money later without having to pay the penalty.

Early retirement can be an excellent idea, but before doing so be sure to consider how it can affect you financially to take money from your retirement investment account prematurely.

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