Avoiding early

withdrawal

penalties

altogether!

HOW TO RETIRE EARLY

STEP #1: FIND YOUR “ENOUGH”

STEP #1: FINDING YOUR “ENOUGH”

Without consciously figuring out what you need to be happy,

you’ll always be susceptible to the hedonic treadmill.

That is, you’ll believe that “once I buy this, I’ll be happy”, only to

realize that happiness is short-lived, and you need to find your next

spending target. It’s an expensive, never -ending battle.

As fellow Fool Morgan Housel has pointed out, happiness

really boils down to a few key factors:

Control over what you’re doing.

Progress in what you’re pursuing.

Connections to other people.

Having purpose and meaning.

STEP #1: FINDING YOUR “ENOUGH”

The purpose of finding your “Enough” is three -fold.

1. Once found, you’ll be far better at l istening to your own

needs, and figuring out what you need to be happy— instead

of l istening to the outside world alone for validation.

1. Almost always, concentrating on this causes a reduction in

spending. Contrary to what some may have us believe, after

having our basic needs met, money and possessions to add

much sustainable contentment.

1. By reducing your spending, you’ll be able to save more and

you’ll need less (since you’ll be spending less) to retire on.

STEP #2: MAX OUT YOUR 401(K) AND

TRADITIONAL IRA

STEP #2: MAX OUT YOUR 401(K) AND

TRADITIONAL IRA

We’ll get to why these two can work even better

than a Roth a few steps later.

For now, all you really need to know is that by

maxing out both of these accounts, you

significantly reduce your taxable income .

STEP #3: USE YOUR EXTRA SAVINGS TO PUT

INTO NON-TAX ADVANTAGED ACCOUNTS

Yup, you read that right—start investing in a regular old

brokerage account.

Because you’re a long -term investor, you shouldn’t owe much—

if anything— in capital gains.

You will, however, need to pay taxes on dividends you receive.

Once you retire, this will provide you with a necessary cushion

and, in the end, you might not owe anything in taxes.

STEP #3: USE YOUR EXTRA SAVINGS TO PUT

INTO NON-TAX ADVANTAGED ACCOUNTS

STEP #4: RETIRE!

STEP #4: RETIRE!

To be honest with you, I actually hate the word “retire”. It’s not

very specific, and too often, people don’t realize that the goal

of just “not working” isn’t very satisfying.

I prefer to say: “declare your financial independence.”

This doesn’t mean that you don’t work, or create things, or participate

in activities that you may or may not get paid for.

Instead, it means that you have full control over your time, and you

get to decide when to “work”, when to “relax”, and when to do

whatever else you want to do.

STEP #5: USE YOUR MONEY FROM YOUR

BROKERAGE ACCOUNT TO LIVE OFF OF…FOR NOW

STEP #5: USE YOUR MONEY FROM STEP 3

TO LIVE OFF OF…FOR NOW

Believe it or not, you could actually live off of your capital

gains and dividends tax-free if you’ve truly reduced your

spending.

If you are in the 10% or 15% tax brackets in retirement, you

owe nothing for such gains. As I’ve shown before, you could

bring in over $100,000 per year and still be in this tax

bracket, depending on your fil ing status and the exemptions

that you take.

STEP #6: BEGIN SLOWLY CONVERTING TO

A ROTH IRA

STEP #6: BEGIN SLOWLY CONVERTING TO

A ROTH IRA

In your first year of retirement, convert an amount equal to

your expected yearly expenses into a Roth IRA. You will

continue doing this every year until all of your money has been

converted.

Any conversions are considered regular income, so there’s

l ikely no way to avoid paying some taxes on these conversions.

However, because you are retired and living off of less than you were

earning in your working years, the taxes you owe should be

substantially less than had you initially put your money into a Roth

IRA.

STEP #7: AFTER FIVE YEARS, START

LIVING OFF OF YOUR ROTH MONEY

STEP #7: AFTER FIVE YEARS, START

LIVING OFF OF YOUR ROTH MONEY

Once five years have passed, you can withdraw any principal

you’ve put in a Roth tax free!

By the time you reach 59 ½, you can also withdraw any capital

gains tax-free as well!

And just like that, you’ve avoided paying a ton of taxes, and

maximized your time for the most important things in life!

LOOKING FOR OTHER WAYS TO MAXIMIZE

RETIREMENT INCOME?

Our top retirement experts expose a method so simple you’ll

be shocked you didn’t think of it yourself. To access this free

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