How to Retire Early and Avoid Early-Withdrawal Penalties

By Markets Fool.com

Want to know how to retire early? The two most important steps are simple. First, find your level of "Enough."Second, spend less than you earn and invest the difference.

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I wish I could tell you that this alone could lead to an early retirement, but there's one caveat that can dash the dreams of many super-savers: penalties incurred for withdrawing your tax-advantaged savings early. Though there are some circumstances in which you can withdraw money from your 401(k) or IRA early, you generally need to wait until you reach age 59-1/2 before taking your money out penalty-free.

No matter what, you simply can't avoid paying some taxes on your retirement savings. But there are ways to reduce them. More importantly, there is a way to get your money far before you turn 59-1/2 and never pay a dime in penalties. In the slideshow below, you'll see how this process works. Thanks to the Mad Fientist blog, which first brought this method to my attention.

Photos:Hartwig HDKvia Flickr,American Advisors Groupvia Flickr,401(k) 2012via Flickr,Calita Kabirvia Flickr,eFile989via Flickr,Pudgeefeetvia Flickr.

The article How to Retire Early and Avoid Early-Withdrawal Penalties originally appeared on Fool.com.

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