Retire at 55: How the rule of 55 can help

For years, 59 1/2 was my target retirement year. Why? Well, it is common knowledge that we get access to our 401Ks starting then. Before 59 1/2, there was a significant tax penalty for withdrawals.

Yes and come to find out, no.

The penalty is there and does apply. However, as with many things in life, there is a loophole for those who know how to apply it correctly.

I learned about this option in 2017 when I first stumbled upon the FIRE (Financially, Independent, Retire, Early) movement. This was thanks to the ChooseFI podcast.

Amazing! Starting the year you turn 55, if you get laid off, fired, or leave your company for any reason, you can access and withdraw from your company-sponsored 401K plan with no early withdrawal penalty.


Learning this completely changed my mindset about when we could retire comfortably. It also changed our savings strategy since it compacted the timeframe for reaching a savings level that could sustain us until we reach Social Security and Medicare.

It just as importantly made the work optional date even closer. We were already on a coastFI trajectory and now I knew that starting the magic year of 55, our live choices would expand greatly.