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The Rule Of 55 | Ep 201

The Rule of 55 is an IRS provision that will allow you to access the money in your 401k long before 59.5. Brad shares his COVID board game of choice and Jillian from Everyday Courage joins us to discuss what to do when all hope is lost.


Brad has been enjoying playing Dominion and has found a free online version. Brad and his family have been getting together with his brother over Zoom for some fun online Dominion playing. If you’d like to play with Brad online you can connect with him at the Dominion website. His handle there is BradChooseFI.

The Mailbag

Ryan wrote in announcing he is debt-free! He found ChooseFI six months ago and he pushed himself to get his finances in order 15K of student loans and 5K credit card debt! Awesome job Ryan!

Nick called in with a question about the Rule of 55.

Hi Brad and Jonathan, my name is Nick from Westchester, Pennsylvania. The reason for my call today was I was hoping you guys would do a piece about the Rule of 55 as it pertains to 401k plans. The bulk of my retirement savings is in my 401k and unfortunately that’s not accessible until 59.5. I’ve heard many great strategies such as the backdoor Roth on your shows before but I’ve never heard talked about this Rule of 55.

The Rule of 55 is an IRS provision that allows you to withdraw funds from your 401k or your 403b without a penalty at 55.

You can access funds in the calendar year of the year you turn 55 (or later).  And for public employees, it becomes the Rule of 50. It also has to be from your current employer’s 401k or 403b. You can also roll money over from your old 401k to your current 401k.

For a deeper dive, check out this article from the Balance.

Businesses That Are Pivoting

Jessica wrote in with an example of how local business has adapted to the changes. They quickly adapted to a limited menu for curbside pick-up and delivery. They are also selling groceries at prices on par with the local grocery store. Recently, they patterned with a local distillery that is making hand sanitizer and is now selling spray bottles of hand sanitizer and wipes.

Jonathan knows a photographer who has offered a free social distancing photo shoot. She is fostering so much goodwill within the community and will boom when things go back to normal.

Brad is loving his Zoom Crossfit workouts. He says he would pay full price to do these even after the restrictions have been listed. You can check out his particular CrossFit workout at West End CrossFit in Richmond, Virginia.

Jillian From Everyday Courage

We got a comment recently that goes as follows:

I’ve been listening without commenting for months now. I’ve gotten through half of the episodes skipping around to find something inspiring. I’ve been determined to listen all the way through before giving up but I feel like it’s time to give up. I’ve got to say, this has been the most difficult four months. I start every episode that today is the day I get action items to turn my loser life around. Then I finish every episode wondering why I don’t get the excitement and why I don’t believe this is possible. What’s wrong with me? I literally finish every episode depressed and upset at the guests, the host, and most of the commenters.

I’m starting late to financial literacy and I’m in debt up to my eyeballs. I don’t see how any of the topics covered in the hundreds of episodes I’ve listened to can help someone who is as far behind as I am. Everyone is either 1) a natual saver who has optimized, 2) some sort of genius who is just better than most people at everything, or 3) had a great family that taught them and guided them into a life that worked.

I’m too stupid, useless, and too far behind for any of this to ever work. I just can’t listen anymore and honestly, I’m not sure there is any hope left.

Jillian understands, she often felt the same way. That getting her finances in order was just not in it for her. She felt hopeless and that there just weren’t possibilities for her. She was afraid to share her personal story online because it wasn’t perfect. But reminds us that life is gritty but it is possible to make progress.

Imperfect people continue to show up and make progress in their lives, but it’s not easy.

What Can You Do If You Are Feeling Hopeless?

It’s very easy to look at someone from the outside and think they are crushing it and that it’s just win after win. But in reality… they are out of their comfort zone and just fumbling through and trying new things–and failing more than they succeed.

Try to get away from the success/failure mindset. Take one little step. You can’t cross the finish line today… but what CAN you do? What is a tiny change you can make today? Do that. And follow that with another little step. And another

You can start by being curious about your budget. Don’t start by trying to create the perfect budget… just start by being curious about where your money is going. Just knowing where you are at is a big first step.

Or maybe you can start by simply listing your debts and interest rates. If it’s really hard, set a timer and work until the timer goes off… and then stop for the day. Aim for doing this three times a week until it’s complete.

The important part is to start and realize that it won’t be perfect, and it won’t get done overnight. But celebrate every little step along the way!

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
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