Most people think the money in their retirement accounts is locked away until they turn 59½.

And to be fair, they're not totally wrong.

The IRS does impose a 10% early withdrawal penalty on most retirement account distributions before that age.

Combine that penalty with income taxes upon withdrawal, and you could lose close to half of what you pull out!

The tax code is thousands of pages long and buried in there are a bunch of fully legal ways to access your retirement dollars early without paying any penalties.

I spend an unhealthy amount of time reading IRS publications so you don't have to. So, here are my favorite strategies to get money out of your retirement accounts before retirement age, how each one works, and what to watch out for.

Let's dive in.

If you are a regular reader of this newsletter, you know how much I love Roth IRAs. And this is one of the biggest reasons why: You can withdraw the dollars you contribute to your Roth IRA at any time, for any reason, with zero taxes and zero penalties.

Since Roth IRA contributions are made with after-tax money, you already paid income tax on those dollars before they went in. The IRS has no claim on them when they come out.

But there is key distinction most people miss between contributions and earnings.

Your contributions can come out anytime, but the earnings on those contributions are a different story and generally should stay put until 59½.

In 2026, you can contribute up to $7,500 to a Roth IRA ($8,600 if you are over 50). And if you've been maxing out your Roth IRA for years, you could have a very meaningful amount sitting there that's accessible right now.

But be careful: once you pull contributions out, you can't put them back in!

The annual contribution limit doesn't reset. So think of this as a one-way door for the dollars you withdraw.

This withdrawal strategy gets even more powerful with the Mega Backdoor Roth.

If you've been using the Mega Backdoor Roth IRA loophole, you could be funneling up to $72,000 a year into your Roth IRA (the 2026 total 401k limit, minus employee contributions and employer match). After a few years of doing this, you could have hundreds of thousands of dollars in accessible Roth contributions.

As I've written before, the income limits on a Roth IRA are completely artificial if you know what you are doing. So, if you are not maxing out your Roth IRA every year (including through the backdoor or mega backdoor strategies), you are leaving one of the most flexible retirement accounts on the table.

I personally contribute almost all of my self-employment income to my Roth IRA via my Solo 401k and the mega backdoor loophole. Every dollar that goes in is a dollar I can pull out at any time if I ever need it.

And if you want a simple way to execute this strategy, ​reply to this email with “Tax Season!” for a special discount to a platform built to help you reduce your tax bill by investing your dollars more wisely. You can get started in just a few minutes and potentially save thousands on your 2025 tax bill!

This one is a little more advanced, but it's one of the most powerful strategies for anyone thinking about early retirement.

When you convert a pre-tax IRA (Traditional, SEP, rollover) to a Roth IRA, you pay income tax on the converted amount in the year of conversion.

That taxes that year could sting, but here's where it gets interesting though: after a 5-year waiting period, you can withdraw the converted amount with no penalties, regardless of your age.

You don't need to wait until 59½. You just need to wait 5 years from January 1 of the year you made the conversion.

This is why people in the FIRE (Financial Independence, Retire Early) community love what's called a "Roth Conversion Ladder."

The strategy works like this: You retire early and start converting chunks of your Traditional IRA to a Roth IRA each year. You size each conversion to fill up the lower tax brackets so you're paying as little tax as possible. Five years later, those converted dollars become available to you penalty-free. If you keep doing this every year, you create a rolling pipeline of accessible money.

The key is having enough other savings (taxable brokerage, Roth contributions, cash) to bridge the first 5 years before the conversions start becoming available.

Do you remember Ted?

If you've read my breakdown of the anatomy of a hundred million dollar Roth IRA, you'll remember this story.

Ted Weschler is one of Warren Buffet’s deputies at Berkshire Hathaway. He’s also the man who made one of the ballsiest tax moves of all time…

He built a Traditional IRA worth over $100M through decades of exceptional stock picking, then converted the entire thing to a Roth IRA.

His tax bill on that conversion was reportedly over $28 million. But after that, every single dollar in his Roth IRA (now likely worth $250M+) is completely tax-free.

And 5 years after the conversion, he could access the converted amount before retirement age.

Most of us aren't sitting on a hundred million dollar IRA. But the mechanics work exactly the same at any dollar amount.

If you have a year with unusually low income, like taking a sabbatical, going back to school, switching jobs, or starting a business, that's a prime opportunity to convert some pre-tax dollars to Roth at a low tax rate.

Most people think tax planning only matters when you are making a lot of money. The reality is good tax planning is valuable all the time, including (and especially) in low earning years.

Important details to get right

Each conversion has its own separate 5-year clock. So, a conversion you make in 2026 becomes accessible January 1, 2031 and a conversion in 2027 becomes accessible January 1, 2032. And so on.

The ordering rules for Roth IRA withdrawals go: contributions first (always accessible), then conversions (oldest first), then earnings (last). This ordering works in your favor since it means contributions always come out first, tax and penalty-free.

One more thing to keep in mind: be careful about the pro-rata rule.

If you have both pre-tax and after-tax dollars across your IRAs, the IRS won't let you selectively convert just the after-tax portion.

The fix is to roll all pre-tax IRA dollars into a Solo 401k before doing any conversions, which is exactly what I do with my own setup.

If you have a Solo 401k, you can borrow up to $50,000 (or 50% of your account balance, whichever is less) at any time, for any reason.

This is one of the most underrated features of these plans.

It's not technically an "early withdrawal" since you're borrowing from yourself and paying yourself back. But it gives you access to your retirement dollars without any taxes or penalties.

Here's how it works: you take out the loan, pay a reasonable market interest rate (think somewhere around the prime rate), and pay it back within 5 years. The interest you pay goes right back into your own Solo 401k, so you're essentially paying yourself. If you use the loan to buy a primary residence, you can extend the repayment period beyond 5 years.

Between the contribution limits ($72,000 per year per spouse in 2026), Mega Backdoor Roth access, and participant loans, the Solo 401k is the most powerful retirement account in America for anyone with self-employment income. It's not close.

What about your employer 401k?

Many employer 401k plans also allow participant loans under similar terms. Check with your HR department or plan administrator.

But there's an important risk with employer 401k loans that doesn't apply to a Solo 401k: if you leave your job (voluntarily or not), you typically have to repay the outstanding loan balance in full by your tax filing deadline for that year. If you can't repay it, the outstanding balance gets treated as a distribution, which means income tax plus the 10% early withdrawal penalty.

With a Solo 401k, you're not going to fire yourself, so this risk basically doesn't exist. It's your plan and you control the terms.

One scenario where this is incredibly useful: Say you want to put a down payment on a property, or fund a new business venture, or cover an unexpected expense. Instead of selling investments in a taxable account and paying capital gains tax, you borrow from your Solo 401k at a low rate, put those dollars to work, and pay yourself back over the next few years. Your retirement account keeps growing, and you avoid triggering any taxable events.

This one is pretty straightforward but gets misunderstood all the time.

If you leave your employer (quit, get laid off, or retire) during or after the calendar year you turn 55, you can access the 401k funds at that employer with no 10% early withdrawal penalty.

You still owe income tax on the withdrawals, but the penalty everyone warns you about is waived.

This can save you nearly 5 years compared to the standard 59½ rule. For someone planning an early retirement in their mid-50s, this is huge.

Some important nuances

This only works with the 401k (or 403b) at the employer you separated from.

You can't access 401k funds from a previous employer using this rule, and it does NOT apply to IRAs. This is critical because if you roll your 401k into an IRA before you need to use the Rule of 55, you lose this benefit entirely.

So if you're in your early 50s and thinking about retiring soon, DO NOT roll your employer 401k into an IRA. Keep it where it is until you've separated from service and accessed what you need.

There is also a lesser-known exception for public safety employees (police officers, firefighters, EMTs, air traffic controllers) who can use a similar rule starting at age 50 instead of 55.

Consider consolidating your 401ks before retiring

If you have old 401k accounts from previous employers, consider rolling those INTO your current employer's 401k before you separate from service. That way, when you leave after 55, the Rule of 55 applies to the entire consolidated balance.

Not all employer plans accept incoming rollovers, so check with your plan administrator. But if yours does, this can meaningfully increase the pool of money you have penalty-free access to.

This is the least flexible option on this list. But it's also the most universally applicable, since you can start it at literally any age.

Under IRS Rule 72(t), you can take early distributions from your IRA or 401k without the 10% penalty, as long as you commit to taking "substantially equal periodic payments" (SEPP) for the longer of 5 years or until you turn 59½.

So if you start at age 40, you'd need to continue taking payments until 59½ (roughly 19 years). If you start at age 57, you'd need to continue for 5 years (until age 62).

There are three IRS-approved methods to calculate your payment amount:

Most people going this route use the fixed amortization method since it typically generates the highest payment.

Here's the big catch though: you cannot stop or change your payments once you start.

If you break the SEPP schedule before the required period ends, the IRS will retroactively apply the 10% penalty to every single distribution you've taken, plus interest. If you've been doing this for years, that retroactive penalty can be absolutely brutal.

There is one exception, though. The IRS allows a one-time switch from the fixed amortization or annuitization method to the RMD method. This can be useful if your account grows significantly and you want to reduce your required payments.

Who is this best for?

Rule 72(t) is ideal for someone who has a large IRA, wants to retire well before 55, and needs a predictable income stream. It's not great for anyone who needs flexibility.

A potentially smart move you can make with this rule is, if you have a large IRA, you can split it into two separate IRAs before starting. Apply 72(t) to one of them (sized to produce the income you need) and leave the other untouched for growth. That way you're not forced to take payments from your entire retirement balance.

Beyond the five strategies above, the tax code has a bunch of other exceptions to the 10% early withdrawal penalty that are worth knowing about. Some of these were added or expanded under SECURE Act 2.0.

The SECURE Act 2.0 additions are a big deal because they chip away at one of the oldest arguments against retirement accounts: that your money is completely locked up. These new exceptions make retirement accounts a bit more of a safety net, even before retirement.

If you're thinking about early retirement or just want the peace of mind that your retirement dollars aren't completely off-limits, here's how I'd think about stacking these strategies:

Max out your Roth IRA contributions every year (including through the backdoor or mega backdoor). These contributions are always accessible, and the sooner you start, the larger your accessible pool gets. I've written extensively about how high earners can still leverage a Roth IRA despite the income limits.

If you have self-employment income, set up a Solo 401k. The combination of high contribution limits, Mega Backdoor Roth access, and the ability to borrow $50,000 at any time makes it the most versatile retirement account you can have.

Build a Roth Conversion Ladder if you plan to retire early. Start converting in low-income years, and in 5 years those dollars become penalty-free. The Ted Weschler approach at scale shows just how powerful this can be.

Don't roll your employer 401k into an IRA too early. If you're in your 50s, the Rule of 55 could save you from the penalty entirely. Keep that option open.

Use 72(t) as a last resort for early access. It works, but the rigidity and the consequences of breaking the schedule make it the least forgiving option.

With some planning, you can build a system where a meaningful chunk of your retirement savings is accessible at almost any age.

And that's the real power of understanding the tax code.

It's not just about saving on taxes today. It's about building a financial life where your money works for you on your timeline, not the government's.

Reply to this email and let me know which of these strategies was new to you!

Until next week!

-Ankur

P.S. If any of these strategies sparked ideas for your own retirement accounts, reply with "Tax Season!" for a special discount to a platform built to help you invest your dollars more wisely (and potentially save thousands on your future tax bills).

Author Disclosures: This post is for informational and educational purposes only and solely reflects the personal views of the author. It is not investment, legal, tax, or professional advice. Any examples, experiences, or investment returns discussed do not guarantee future results. Laws and regulations discussed are subject to change and may not apply to your individual circumstances. Unless specifically stated, posts do not reflect the views or opinions of The Vibes Company Inc. or its affiliates.