Challenges in Accessing Wealth Early for Retirement Plans

Asset location matters

The key issue my friend is facing is that nearly all of his household's money is tied up in ways that makes it difficult or expensive to tap for normal living expenses. When the county reappraised his home last fall, for instance, its value went up by nearly $150,000.

• While that added to his net worth, he can't tap that money without selling or taking out a home equity loan.
• His family's major assets include retirement accounts like 401(k)s and Roth IRAs and other restricted accounts like 529 college savings plans and a Health Savings Account.
• Only around 10% of his net worth sits in easily reachable locations like a checking, savings, or ordinary brokerage account.

How to tap retirement money early

There are ways for my friend -- and others in a similar situation -- to get access to retirement money early. They include things like a Roth IRA conversion ladder or a Substantially Equal Periodic Payments withdrawal plan. While they can help, they do bring their own limitations.

1. A Roth IRA conversion ladder typically requires at least a five-year head start before it can really kick in.
2. A Substantially Equal Periodic Payments plan requires a commitment for the longer of five years or until the retiree reaches age 59 and a half.
3. If you want to retire very early, it's important to build a nest egg that you can access early.

Whether you're looking forward to retiring at a traditional age or would like to call it quits a decade or more ahead of your peers, there's incredible power in planning ahead. The sooner you know what you want out of your retirement, the earlier you can start getting your money in the right places so that you can get at it when you want it.

Get started now, and give yourself the most time you possibly can to give yourself your best shot of reaching the type of retirement you want when you want to get there.