Fixed Amortization Method

The government has all kinds of stipulations as to when and how and if you can pull out retirement savings early. (Warning: Try realllllly hard to not do this, as it comes with all kinds of tax penalties.) This method uses IRS tables to calculate an early retiree’s life expectancy (which is mildly creepy, but okay) and figure out how much that person should receive each month from their IRA. It’s important to note that, once that monthly amount is locked in, whether we’re 58 years old or just turned 25, we can’t adjust that amount until we turn 65. Well, we can, but we’d have to pay big penalties. We also can’t stop the withdrawals, unless we want to-–that’s right-–pay a big penalty.

On the plus side, early retirees who opt for the fixed amortization method usually end up getting higher monthly payouts than those who opt for the fixed annuitization or required minimum distribution methods. On the neg, since it is a fixed payment, changes in the general economy (like rising inflation) won’t be taken into account, which could result in us getting less money each month than we might otherwise.