Getting It Out: 59.5, RMDs, and Social Security

Everyone learns how to put money into retirement accounts. Almost nobody learns the rules for getting it out, which is where the penalties, the exceptions, and one enormous 8%-per-year decision live.

Last verified 2026-07-16

The penalty, and the doors around it

Withdraw from a retirement account before 59½ and you generally owe income tax plus a 10% penalty. That's the default, and the exceptions are more numerous than most people assume.

The Rule of 55 lets you take penalty-free withdrawals from the 401(k) of the employer you just left, if you left in or after the year you turned 55 — but only from that plan, which is a reason not to roll it into an IRA first. SEPP under §72(t) allows penalty-free withdrawals at any age via substantially equal periodic payments, locked in for five years or until 59½, whichever is longer.

Other genuine exceptions include a $10,000 lifetime IRA allowance for a first home, qualified higher-education costs, total and permanent disability, certain medical expenses, and birth or adoption. One thing they share: an exception to the penalty is not an exception to income tax. You generally still owe that.

Eventually the government makes you withdraw

Tax deferral doesn't last forever. Required minimum distributions begin at age 73 under SECURE 2.0, rising to 75 in 2033, and they apply to Traditional IRAs and pre-tax 401(k)s.

The amount is a formula: your balance divided by a life-expectancy factor from the IRS tables. It's taxable income whether or not you need the money, which can push a comfortable retiree into a higher bracket and affect how much of their Social Security is taxed.

Roth IRAs have no RMDs for the original owner, and that asymmetry is one of the strongest arguments for holding some Roth balance regardless of the bracket arithmetic — it's the only pot you fully control the timing of.

The 8% decision

Full retirement age is 67 for anyone born in 1960 or later. Claim at 62 and your benefit is permanently reduced to roughly 70% of the full amount. Wait past 67 and delayed retirement credits add about 8% a year up to 70, producing about 124%.

Permanently is the word doing the work. This isn't a temporary reduction that corrects at full retirement age — the level you claim at is the level you keep, adjusted for inflation, for life. An 8% guaranteed real increase per year of waiting has no equivalent anywhere else in this app.

That said, claiming early isn't automatically wrong. It depends on health and family longevity, whether you're still working, spousal and survivor benefits, and whether you simply need the income now. No credits accrue after 70, so there's never a reason to wait past that. The SSA's own planner tools are the right place to run your actual numbers.