Retirement savings accounts are governed by well-known rules on everything from income eligibility to contribution levels to the timing and size of withdrawals. But there are a number of financial-planning opportunities these accounts offer that often get overlooked because holders worry about taxes and penalties.

While savers should be cautious about provisions that allow them to tap funds meant for retirement, here are three under-the-radar rules on individual retirement accounts or 401(k)s that allow people to access their money without penalty or juice their savings:

Withdraw Roth Contributions Without a Penalty

Savers fund Roth IRAs with after-tax contributions, and the earnings on those contributions grow tax-free. To withdraw those earnings without paying taxes and a 10% penalty, the account must be open for at least five years, and the holder must be at least 59½. But there’s a workaround.

The key word is earnings. The timeframe, taxes, and penalties apply only to earnings, says Beau Henderson, founder of RichLife Advisors.

The contributions that savers make can come out at any time, without penalty, regardless of their age or when they established the account, because taxes were already paid on that money, he says. For example, if someone owns a $100,000 Roth that consists of $75,000 in contributions and $25,000 in earnings, the investor can pull out that $75,000 with no penalties.

“If I need a bridge for a couple of years until [a client is] old enough to access retirement money without penalty, that Roth might be a nice tool,” Henderson says.

Because withdrawn Roth contributions can be used for anything, it is one of the most flexible retirement accounts, says John Campbell,  senior wealth strategist at U.S. Bank Private Wealth Management. “People don’t realize there are ways to tap it if need be, whether it’s buying a house, or if you’re considering it for educational expenses and you don’t know if your child’s really going to use a 529 college savings plan,” he says.

There are also three qualified reasons why someone who has owned their Roth IRA for five years, but is under the age of 59½, can take distributions on both contributions and earnings without triggering penalties or paying taxes:

• Buying, building, or rebuilding a first home, with a $10,000 lifetime maximum withdrawal.

• The account owner becomes permanently disabled.

• A beneficiary or the person’s estate makes a withdrawal after the account owner’s death.

Saving Beyond the Tax-Deferred Minimum

Workplaces that offer 401(k) and similar accounts allow employees under age 50 to save up $19,500 tax-deferred in 2021, while those over 50 can contribute $26,000. However, some employers have a provision in their 401(k) plans that allows workers to contribute after-tax money to their qualified plans.

Audrey Blanke, financial planner with Baird, says for plans that allow voluntary after-tax contributions, the combination of employee and employer contributions can total up to $58,000 for people under 50 and $64,500 for those over 50. “This is a way to really turbo-charge your savings,” she says, noting the employees need to confirm with their workplace if this is allowed.

Here’s how it works.

An employee under 50 contributes the maximum $19,500 to a 401(k) or $26,000 for over 50.

• The employer contributes $8,000 in matching contributions and $2,000 in profit-sharing for a total of $10,000.

• The employee can now contribute up to an extra $28,500 after-tax for a total of $58,000 if they’re under 50.

• The employee aged 50 or older can also contribute up to an extra $28,500 after-tax for a total of $64,500.

Blanke says people should work with their financial advisor to make sure they heed the limit because if an employee saves too much, he or she will need to withdraw the excess and have to file extra tax paperwork to account for the overpayment.

There are three benefits to putting after-tax money in a 401(k) if allowed, she says. After-tax contributions can be withdrawn if needed without facing any tax penalty, they get the same retirement plan protection as pretax money, and the money can be rolled into a Roth IRA without further taxes.

Some plans allow those after-tax contributions to be immediately rolled over to a Roth conversion, commonly referred to as a “mega Roth,” but these in-service withdrawals aren’t common, Blanke says. However, employees who leave their firm can roll those after-tax contributions into a Roth IRA at any time.

Substantially Equal Periodic Payments 

By using substantially equal periodic payments from a retirement account–more formally known as a rule 72(t) distribution–savers under 59½  can avoid paying the 10% penalty on early withdrawals. These can be taken from traditional or Roth IRAs.

With this type of distribution, account holders must take at least five substantially equal periodic payments, and these distributions must occur for either five years, or until the owner reaches 59 ½, whichever is longer.  That means someone who starts a 72(t) distribution at age 52 must take withdrawals for seven years, while someone who is 57 would have to make withdrawals until age 62.

Blanke says rule 72(t) distributions are viable options for people who need access to their money, but they are complex calculations with rigid distribution rules. “These are definitely not a do-it-yourself thing,” she says.

There are three ways the Internal Revenue Service allows individuals to calculate these distributions. The first is the required minimum distribution method, which takes a person’s balance, current interest rates and divides it by his or her life expectancy. Each year it is recalculated based on life expectancy and current balance.

The other two methods are a fixed amortization method, which annually distributes by amortizing the account balance over life expectancy, and a more-complex fixed annuitization method, which uses a person’s account balance, age and life expectancy and an annuity factor.

Distributions are bound by the prevailing interest rate, Blanke says, so a lower rate means lower payments.

Blanke recommends working with a tax and financial advisor to determine a proper starting balance for 72(t) distributions. For example, if the IRA is $1 million and the retiree needs $750,000, rather than drawing down the total amount, she recommends opening a second account to represent the 72(t) distribution, in this case $750,000, and leave the $250,000 in the original IRA. Although the retiree will avoid a penalty, he or she will still need to pay taxes on the distribution amount, so that’s another reason to work with a tax advisor to determine the right balance.

Once rule 72(t) distributions are put in motion, they can’t be undone. However, Campbell says they can be adjusted slightly to all individuals to withdraw more, though that is uncommon.

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