Accessing your life savings is about to get a lot cheaper, but that doesn’t mean now is the time to crack open your nest egg.
Retirement no longer feels far off for Generation X — those born between 1965 and 1980. A fortunate few may have already exited the workforce and many more will follow in the next two decades.
Soon, they’ll be checking off retirement milestones like applying for Social Security and Medicare. But there’s another milestone that’s equally important, and the oldest members of Gen X will begin reaching it on July 1, 2024.
Say goodbye to this annoying retirement account fee
Most retirement accounts charge what’s known as an early withdrawal penalty to discourage savers from taking their money out too soon. This penalty is 10% of the amount withdrawn, and it applies to all savers who are under 59 1/2 and do not have a qualifying exception, like making a first home purchase or paying a large medical bill.
Early withdrawal penalties can take a serious bite out of your savings, especially if you make several of them. But they’ll soon be a thing of the past for the eldest members of Gen X who will reach 59 1/2 years of age in the latter half of 2024.
It’s great news, but it’s important to realize that no-penalty withdrawals doesn’t mean free withdrawals. If you’re taking money out of a tax-deferred account, like a traditional IRA or 401(k), you will still owe taxes on your money. It’s possible that taking large sums out could even push you into a higher tax bracket than you were anticipating.
