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560: Dude ACTUALLY Withdraws From His 401(k) and Retires at 47
BiggerPockets Money Podcast
Navigating 72(t) Distributions and Real Estate Sales
Selling real estate can impact financial strategies tied to 72(t) distributions, which require participants to take consistent annual distributions until age 59 and a half to avoid penalties. Even if rental income ceases, these mandated distributions persist, ensuring a pronounced cash flow commitment. When disposing of rental properties, sellers should account for taxes, capital gains, and depreciation recapture, thereby optimizing the net profit for investment in a brokerage account. Additionally, selling a primary residence provides a tax advantage as the first $250,000 of capital gains is tax-exempt, which allows the seller to enhance liquidity without affecting Affordable Care Act subsidies. This strategy effectively reduces living expenses by eliminating mortgage payments associated with the primary residence, showcasing a sustainable approach to manage finances during retirement.
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