401k’s and IRA’s have different rules when it comes to taking penalty-free withdrawals. The more common rule is that you must obtain age 59 ½ to avoid the 10% early withdrawal penalty from an IRA.

72T distributions are used to distribute funds from an IRA before you have turned 59 ½ to avoid the 10% early withdrawal rule.

The first step before calculating how much you should be saving to reach financial independence is getting comfortable with 3 incredibly large variables that are assumptions in the planning process that must be monitored.

After you are comfortable with the assumptions of the variables (tax, inflation, rate of return), we will turn our attention to calculating how much money we will need to be withdrawing from our portfolio.

In Step 2, we calculated that we need $151,713 per year from our portfolio to be “financially independent.”

In Step 3, we calculated that we would need to build a “nest egg” of $3.8 million. Let us know calculate how much we need to save every year to go from where you are to where you want to go.