I'm seeing early withdrawal warnings before my retirement age. What might be happening?
Early withdrawals in retirement refer to taking money out of a retirement account, such as a 401(k), 403(b), or IRA before you reach the age the IRS determines for penalty-free access, which is currently 59½ for most accounts.
Note
The Early Withdrawal Warning tends to appear more often if you’re pursuing FIRE (Financial Independence, Retire Early), since you likely won’t have a traditional paycheck through the age range most retirement planning assumes.
In ProjectionLab you might see an Early Withdrawal Penalties warning symbol at the top of your screen. Below the warning will include the ages when the penalties are incurred, such as age 52 to 55.
In each year of the simulation, ProjectionLab needs enough income to satisfy your expenses, debt payments, taxes due, and more. If you don’t have income from a salary, side hustle, or similar source, ProjectionLab will draw down your existing assets as needed, based on the drawdown order you have defined in Optimize.
Troubleshooting
If you believe your plan shouldn’t have these warnings, try these steps:
- Complete your process of adding Flows and Income Events. It’s possible completing your inputs will resolve this warning.
- Review the liquidity settings on all of your investment accounts, such as Taxable Investments, Roth IRA, and others. Go to your Accounts > click the specific account > Liquidity > choose when withdrawals are allowed from this account and whether this account counts towards your liquid net worth.
- Double check the drawdown order of your accounts.
Related
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