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Episode 3127:
Wanderer breaks down how to access your 401(k) funds before age 59½ without paying penalties, using a strategy called the Roth Conversion Ladder. By carefully rolling over 401(k) funds into a Traditional IRA and then converting to a Roth IRA within tax-free limits each year, you can build a systematic way to unlock your retirement savings early and maximize tax efficiency.
"Money inside your 401(k) is kinda like a raw pot roast. You can’t eat it right away."
"It’s all based on the IRS rule that Roth IRA conversions, rather than contributions, can be withdrawn penalty-free 5 years after the conversion has taken place."
"When you do quit, you roll-over all of them into a Traditional IRA. This is done tax-free."
Optimal Finance Daily - Financial Independence and Money Advice