Clark Howard

“What is the best credit card?”

It seems like a simple, straightforward question. But the answer can actually be fairly nuanced and highly personal.

As Team Clark’s credit card content writer, I can’t count how many times I’ve been asked this question over the years.

My answer is usually some variation of: “There’s no such thing” or “I have some recommendations, but a specific ‘best’ depends on your personal situation.”

Money expert Clark Howard provides a road map for making a smart decision for adding the right credit cards to your wallet. And I inevitably point people to his advice to ensure they’re on the right track with their credit card usage.

But if you landed here looking for answers to the “what is the best credit card” question, let’s walk through things the same way that I might advise an acquaintance who asked this in friendly conversation.

Together, we might just be able to determine which credit card is best for you.

What Makes a Credit Card ‘Good’ Anyway?

Before we try to decide which card is “best for you,” it’s probably a good time to define exactly how we separate the “good” from the “bad” in a world that is full of well-marketed credit cards.

Team Clark assesses the following line items when paring down the options:

Manageable annual fee: While there are some worthwhile travel credit cards with big annual fees, many consumers considering them are aspirational about their use case. Big fee cards usually only pay off for frequent travelers. You may find that a low or no-annual-fee credit card will offer most of the non-premium travel perks you desire.

Strong, consistent and attainable rewards structure: A “good” credit card shouldn’t be built on a gimmick rewards structure. You should see a clear path to profit via the spending multipliers on the card based on your personal spending patterns and ability to pay the balance in full each month. Team Clark recommends building a base return of 2% cash back on all purchases, which is attainable via a no annual fee card. So, if you don’t have one, there’s a good chance that’s going to be the “best” option for you right now. And if you already have one, you can use our cash back credit card rewards tool to help you find a card to best supplement it.

The absence of “gotcha” fees: Everyone knows Clark hates a “gotcha” fee, and that’s especially true for credit cards. We try to find a card with no foreign transaction fees to make paying during international travel a breeze, for example.

Useful cardholder benefits: “Good” credit cards will add value to the cardholder experience with perks you can actually use. Some examples of this include auto rental insurance coverage, cell phone protection, extended warranties, and complimentary TSA PreCheck® membership.

Strong welcome bonus offer: Clark says you should not let a short-term perk impact a long-term decision on a card that is right for your wallet, but that doesn’t mean you should ignore the opportunity to maximize the welcome offer on the right card. These can be quite valuable!

‘Best’ Credit Card Lists and My Most Recommended Cards

While it’s hard to say which single credit card is “best” for someone without knowing the full details of their credit card situation, we do have lists of “best” credit cards for particular situations.

These can help you narrow down what is “best” for your specific card search:

Best Rewards Credit Cards

Best Cash Back Credit Cards

Best Travel Credit Cards

Best Credit Cards for Gas Rewards

Best Credit Cards for Groceries

Best Credit Cards for Restaurants and Dining

Best 0% Intro APR Credit Cards

Best Low APR Credit Cards for Carrying a Balance

If diving into those lists is too “in the weeds” for you right now, I will also include a couple of the cards that I recommend most often to people who ask me to help with their personal credit card searches.

The Everyday Spender

Fidelity® Rewards Visa Signature®

Learn More →

Annual Fee:

$0.00

Foreign Transaction Fee:

None

Rewards Program Details:

Earn unlimited 2% cash back on everyday spending when redeemed as deposit into Fidelity investment accounts.
You can spend your rewards or deposit them into any eligible Fidelity account, giving your money more chances to grow.

This Is the Card for You If:

You want a cash back rewards card that can aid your investing goals. This card can deposit rewards directly into Fidelity retirement and investment accounts.

Given that Clark is a huge proponent of unlimited 2% cash back on a no annual fee card and considers Fidelity one of the top investment companies, this one is my default recommendation to anyone who asks for my personal recommendation.

You have to deposit the rewards into a qualifying Fidelity investment account to get the full 2%, but I believe the concept of dropping your credit rewards into a retirement plan or investment portfolio to save for your family’s future is fantastic.

It also has some pretty sweet travel perks that are uncommon for a no-annual-fee card:

No foreign transaction fees.

Global Entry® or TSA PreCheck® benefit: Earn up to $100 in Reward Points when you apply for either Global Entry® or TSA PreCheck®.

Auto rental coverage: Auto Rental Collision Damage Waiver for up to $75,000 at no cost to you.

This card is in my personal wallet as an everyday spender.

The Catch-all Travel Card

Capital One Venture X Rewards Credit Card

card_name

Annual Fee:

$395

Foreign Transaction Fee:

None

Card Description:

Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travelReceive a $300 annual credit for bookings through Capital One Travel, where you’ll get Capital One’s best prices on thousands of trip optionsGet 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary

Rewards Program Details:

2 Miles per dollar on every purchase, every day. 10 Miles per dollar on hotels and rental cars booked through Capital One Travel. 5 Miles per dollar on flights and vacation rentals booked through Capital One Travel.

This Is the Card for You If:

You are a frequent traveler who wants airport lounge access and can easily claim the $300 annual credit for bookings through Capital One Travel and anniversary miles provided.

When it comes to travel, I defer to Clark’s expertise. He is a more frequent traveler than I am, and he has several of the top travel credit cards in his wallet.

He prefers generic travel cards rather than one tied to a specific airline or hotel chain. This allows him to price shop without being tied to one particular brand.

And the generic travel card that he most consistently speaks glowingly of is the card_name.

The short pitch on this one, which seems to connect with a wide range of people who are in search of their first travel card, is:

You can earn at least unlimited 2x points on every purchase, there are two major statement credits that can effectively cover the $395 annual fee each year, and you can get airport lounge access while enjoying other travel benefits.

I have done some research on the best benefits and total value of the perks:

Top 10 Perks of the Capital One Venture X Rewards Credit Card

What’s the Total Value of the Capital One Venture X Rewards Credit Card Perks?

Are you having trouble picking which credit card is best for you? Do you have a “best” card in your wallet already? We’d love to hear about it in the Clark.com community.

The post What We Say When People Ask: ‘What is the Best Credit Card?’ appeared first on Clark Howard.

Did you know that one in four American homeowners pay condo or homeowner association (HOA) fees?

Lately, these fees have been rising at about 5% a year. Generally speaking, that is a fair amount higher than inflation, and it is starting to become a financial burden on people.

Even worse, many condo association fees are skyrocketing at a much higher rate. In a number of states, it’s not unusual to see condo fees shooting up 10% to 15% annually. These fees are becoming a real problem for long-time residents.

Why Fees Are Skyrocketing

Amenities Creep: You may have bought into a neighborhood when it was a more modest community or condominium project. Over time, however, the newer buyers tend to be more affluent, and they are driving “amenities creep.” They want fancier recreation facilities, they want the pool completely redone, and they want who knows what else — all on your dime.

Legislative Changes: Law changes are also driving up costs. Take Florida, for example. The state passed new laws that have led to a massive increase in condominium fees. For years, many condos in Florida weren’t doing proper ongoing maintenance or funding their reserves. Now, it’s all catch-up time all at once. What used to be a minor monthly expense is quickly becoming a budget buster.

Don’t Forget the HOA Rules

On top of the rising costs, you also have to live with the rules.

You have to know upfront what you are agreeing to. Remember: an HOA or condo board is essentially another taxing authority. Except with this one, you may have even less control than you do with your local government’s property taxes, because these associations rarely have a normal appeal process.

The Power of the Board

Now, some people specifically gravitate toward condo communities because they don’t want to worry about maintenance — they’d rather just pay for it. Others love mandatory HOAs for the strict enforcement of rules regarding what yards have to look like, what a fence can look like, or what color you can paint your front door.

But you must realize that mandatory HOAs have a massive amount of power. They can fine you, and in many cases, they even have the legal power to foreclose on your home for not following rules regarding the exterior appearance of your house and land.

If you like that kind of structure: Go for it.

If you don’t: Know that there is still plenty of opportunity for you to live independently. You don’t have to buy a condo or live in a mandatory HOA community. As an example, in a lot of the country right now, you can buy what is known as a fee-simple townhome instead of a condominium townhome. With a fee-simple townhome, you own the land and are responsible for what goes on outside your dwelling, but you aren’t tied to a traditional condo association.

Don’t Just Complain — Get Involved

If you already live in an HOA community and you feel like the board has run amok, you have to organize.

Think of it just like a local community getting mad about something happening in their school district. What do they do? They rally. They organize. They go to school board meetings, and they run for the board. You need to do the exact same thing in your condo or HOA community.

I have been a board member of three different associations over my lifetime. To be frank, being on the board is mostly a thankless task. But I did it because I needed to protect my financial interests. That is why I got involved, and I ran for the board at different times so I could help make things better in those communities.

That is your responsibility as well. Don’t just sit back and say, “Look at what they are doing to me.” If you don’t like what the board is doing, get organized. You are the one who can make the difference.

Final Thoughts

A home isn’t just about the purchase price anymore. In many parts of the country, HOA or condo fees can add hundreds of dollars to your monthly housing costs, and those fees may keep climbing over time. While it can be difficult to find homes without mandatory associations in parts of the South and Southwest, buyers in other regions often have more options. And thankfully, fee simple townhomes are becoming more common nationwide. Whether you choose an HOA community or not, go in with your eyes open. And if you’re already part of an association, remember that you have more influence than you may think. The people making the decisions are your neighbors, and getting involved is often the best way to protect your investment.

The post Why Your HOA Fees Are Skyrocketing appeared first on Clark Howard.

A podcast listener recently reached out to me with a great question. They received an email from their local community bank promoting a free service called PropertyFraudAlert.com. The service monitors the county recorder’s office and alerts you if someone fraudulently records a document against your home.

The listener wanted to know: Is this a legitimate service worth signing up for?

My answer is absolutely yes.

What Is Home Title Theft?

Let’s be clear: Home title fraud is rare, but it is beyond ugly when it happens to you.

Title theft occurs when a criminal steals your identity, falsifies documents, and transfers the ownership of your home into their name. Once they control the title, they can:

Take out a massive loan against your fully paid-off home.

Sell your home right out from under you without you ever knowing.

Suddenly, you could find yourself facing foreclosure or even being evicted from your own home. Because people lead busy lives, most have no idea this is even happening until the damage is already done.

The “Easy Button” for Title Protection

With a title alert service, you will be notified the moment any “funny stuff” starts with your title, hopefully giving you enough time to shut it down.

Right now, Property Fraud Alert is active in roughly 15 to 17 states. This feels like the early stages of another site I have recommended for years and years: MissingMoney.com. That site started off in just a small handful of states and eventually spread across almost the entire country. I expect this property alert concept to grow the exact same way.

Many people ask me, “Can’t I just register for alerts directly with my local county recorder’s office?” Yes, you can! Many counties offer their own free registry alerts. But the reality is that registering county-by-county is a step most people just never get around to. That’s why I love a centralized site like PropertyFraudAlert.com — it acts as an “easy button” for protecting your home.

Avoid the Expensive Commercial Traps

As best as I can tell, Property Fraud Alert is completely free to use. Do not be fooled by the non-stop commercials and ads you see for private, paid title fraud protection companies.

These private companies will try to charge you crazy amounts of money — sometimes hundreds of dollars a year — to protect your title. Here is why you shouldn’t pay them:

The crime is brutal, but it is incredibly rare. It does not justify a costly monthly subscription.

The information lives in public databases. You shouldn’t have to pay a private company to monitor data that should be easily and publicly accessed for free.

Final Thoughts

If your state or county is covered by Property Fraud Alert, go ahead and sign up. If it isn’t available in your area yet, take a few minutes to check your local county recorder’s website to see if they offer a free direct notification service.

Protecting your piece of the American dream shouldn’t cost you a dime.
The post Is Property Fraud Alert Legitimate? Why You Should Sign Up for This Free Service appeared first on Clark Howard.

Plenty of parents wonder if they’re saving enough for their kids’ college. Far fewer stop to ask the more important question of whether they’re saving too much for college at the expense of their own retirement.

It happens more than you’d think. A parent opens a 529 the week the baby comes home, funds it faithfully every month, and meanwhile contributes just enough to their 401(k) to get the match, or less. On paper, it feels responsible. In practice, it can leave you with a fully funded education account and a retirement shortfall.

Money expert Clark Howard and fiduciary financial advisor Wes Moss have both spent years talking families through this exact tradeoff. Their advice points in the same direction, and it gives you a simple way to test whether your priorities are in the right order.

Why Retirement Should Come Before College Savings

Clark’s position on this has been consistent for decades: “Don’t save a penny for education until you’re saving everything you can for your own retirement.”

The logic comes down to which goal has a backup plan. A student who arrives at college with an underfunded 529 has options. In-state tuition, community college, scholarships, grants, work-study and federal loans all exist. A 65-year-old with an underfunded retirement account has none of those.

Wes Moss, a fiduciary financial advisor and host of Ask an Advisor on the Clark Howard Podcast, puts it this way: “You can’t get a loan for retirement. Your kid can always get a loan, a scholarship, a grant, or a payment plan for college, but there’s no financial aid office for your 65-year-old self. That’s why retirement savings has to come first, every single time.”

Clark has also seen how this plays out on the other end for parents who got the order wrong. In a recent column, he wrote: “Let me be blunt: Parental guilt can be a self-destructive motivator. There are so many college options available at so many different tuition levels. Yet, I see it all the time: Parents stop contributing to their own retirement accounts just so their kid can go to an ‘It’ school.”

The bitter irony, in Clark’s telling, is what happens decades later: “Then, way down the road, when the parents are in retirement and don’t have enough money to live on, those exact same adult children look at them and say, ‘Gosh, Mom and Dad, you really should have done a better job saving for retirement.’ They develop amnesia about the massive financial sacrifice that got them their degree in the first place.”

Underfunding your own retirement to pay for college doesn’t just put you at risk. It can eventually put the financial burden right back on the child you were trying to help.

The 15% Test

So when is it OK to start saving for college? Wes uses a specific checkpoint.

Saving less than 15% of your income for retirement? Prioritize retirement.

Saving 15% or more? Consider adding money to a 529.

Already doing both? Great, but keep retirement as the priority if money gets tight.

Wes explains, “Saving for college is a balance — your own retirement is the anchor, college is the stretch goal built around it.”

If 15% isn’t realistic today, don’t let that discourage you. Save what you can, increase your retirement contributions as your income grows and treat 15% as a target to work toward over time. Making steady progress is more important than trying to fully fund every financial goal at once.

If You Pass the Test, Start Early

Once retirement is on track, the best thing you can do for college savings is start as soon as possible, even with small amounts.

“If you start setting aside even a modest amount when your kids are still in diapers, say $200 to $300 a month into a 529, you’re far more likely to hit both goals than someone who waits until their kids are 15 and tries to play catch-up on both fronts at once,” Wes says.

The math backs him up.

Starting at birth? Investing $250 per month from birth could grow to roughly $107,000 by age 18 (assuming a 7% annual return).

Waiting until age 10? You’d need to save about $850 per month to reach the same balance.

You can run your own numbers with our investment growth calculator.

The 529 Rules Removed the Biggest Excuse

One old objection to 529s was the fear of overfunding an account your kid might never use. That risk is much smaller now. Under current rules, up to $35,000 of leftover 529 money can be rolled into a Roth IRA for the beneficiary over time, subject to annual contribution limits.

Clark calls this the ultimate 529 backup plan. If your kid earns scholarships, skips college or doesn’t use all the money, the balance “gives your child an incredible, tax-free head start on their retirement savings before they even hit their twenties,” he writes.

But the rollover option cuts both ways. It makes a 529 safer to fund, not a reason to fund it ahead of your own retirement. A $35,000 lifetime rollover cap is a nice consolation prize for your child. It is not a substitute for the hundreds of thousands of dollars you may need in your own accounts.

What If College Arrives and the 529 Falls Short?

That’s okay. An underfunded college account at 18 is a solvable problem.

Clark’s favorite solution is the community college transfer strategy. Have your child spend freshman and sophomore years at an affordable local school, knocking out prerequisites, then transfer to the target university for junior and senior years. Transfer admission is generally less competitive than freshman admission, and the diploma comes from the school where your child finishes.

Clark is also direct about the conversation many parents dread: “It is completely okay for you to look at your teenager and say, ‘We can’t afford that college. Period.’”

A Quick Self-Check

If you want to know whether you’re overprioritizing college savings, ask yourself three questions.

Are you saving at least 15% of your income for your own retirement? If not, redirect college contributions to your retirement accounts until you are.

If you’re contributing to a 529, did retirement hit 15% first, or did the 529 get funded ahead of it? The order matters more than the amounts.

Does your college savings plan assume you’ll fully fund four years at any school your child chooses? Partial funding combined with smart school choices, scholarships and student contributions is a legitimate plan, and it’s the one that protects both generations.

The goal isn’t to fully fund every financial objective at once. It’s to put them in the right sequence.

Final Thoughts

You don’t have to choose between your retirement and your child’s future, but you do need to save for them in the right order. Build your own financial security first, then put extra dollars toward college. A child can borrow for school, earn scholarships or choose a lower-cost path. Your retirement doesn’t come with those options. Once you’re ready to save for college, Clark recommends choosing a direct-sold 529 plan. You can see which plans make Clark’s Dean’s List of low-cost options in our 529 plan guide.
The post How To Balance College Savings and Retirement appeared first on Clark Howard.

If you’re thinking about early retirement, the Rule of 55 may be the most useful IRS provision you’ve never heard of.

This rule allows you to withdraw from your 401(k) penalty-free if you are laid off, fired or resign from your job starting in the year you turn 55. That’s nearly five years earlier than the standard 59½ threshold.

“The Rule of 55 is a cool rule if you can swing it,” says Wes Moss, a fiduciary financial advisor with Capital Investment Advisors who answers reader questions in our Ask an Advisor series. Wes considers it one of the most underused tools for people who want to retire sooner, and his research supports making the leap earlier when the numbers allow it: “My research consistently shows a significant jump in happiness and overall well-being for those who transition from working to retirement.”

In this article, we’ll explain how the Rule of 55 works, its fine print, and whether it’s a good idea for you to use it.

What Is the Rule of 55?

Normally, if you withdraw from a 401(k) or IRA before turning 59½, you’ll owe the IRS a 10% early withdrawal tax penalty on top of regular income taxes.

There are several exceptions to the 59½ withdrawal age. Perhaps the most notable is the Rule of 55.

If you leave your job during or after the calendar year you turn 55, you’re eligible to take early withdrawals from that job’s 401(k) plan without the penalty. Note the phrasing: the calendar year you turn 55. If your birthday is in November and you leave your job in March of that same year at age 54, you still qualify.

It doesn’t matter how you leave. You can quit, get laid off or take a buyout, and you’re still eligible.

So why isn’t the rule more widely used? Wes says it comes with layers of fine print that trip people up. “Think of it as financial tiramisu,” he says. “Delicious, but with distinct layers.”

Limitations of the Rule of 55

Here are those layers. The Rule of 55:

Applies to 401(k) plans (and many 403(b) plans). IRAs aren’t eligible for early withdrawals via the Rule of 55.

Works only with the retirement plan at your most recent job. If you have other 401(k)s from previous employers, you won’t be able to withdraw from them penalty-free under the Rule of 55. You’ll need to wait until you’re 59½.

Doesn’t obligate employers to offer early distributions. Your 401(k) plan can allow early withdrawals under the Rule of 55, but it doesn’t have to. The good news: Moss cites research indicating that roughly 85% of plans permit it. But your company can decide to pay you only via a one-time lump sum if you want to withdraw early, which can lead to negative tax and investment consequences. Check with your plan administrator.

Disappears if you roll your money into an IRA. This mistake is permanent. The moment you roll your 401(k) into an IRA, the Rule of 55 no longer applies to that money and you’re back to waiting until 59½. Plenty of people leave a job, follow the standard advice to roll everything over, and unknowingly lock the door on penalty-free access.

Doesn’t excuse you from paying income taxes on your 401(k) withdrawals. The Rule of 55 exempts you from the 10% early withdrawal penalty. But any money you take out of a traditional account counts as ordinary income you’ll need to report when you do your taxes.

Includes mandatory withholding for taxes. Many lump-sum distributions from employer retirement plans are subject to mandatory 20% federal tax withholding, even if your eventual tax bill is lower. Your actual tax liability may differ, and you could receive a refund or owe additional taxes when you file your return.

Rule of 55 Can Be Rule of 50 for Public Safety Employees

If you’re a public safety employee and you meet certain criteria, you may be able to withdraw 401(k) funds penalty-free starting the year you turn 50.

Public safety employees include:

Firefighters

Police officers

Emergency Medical Technicians (EMTs)

Correctional officers

Air traffic controllers

How To Use the Rule of 55 To Fund Your Early Retirement

If you’re interested in making penalty-free withdrawals between the ages of 55 and 59½, make sure you’ve thought through the implications and potential snags.

Here are a few things to consider before you put this plan into motion:

Make sure your employer supports early withdrawals. Companies don’t have to allow early withdrawals under the Rule of 55, and some only allow lump-sum withdrawals. Confirm both before you build a retirement date around this rule.

Consider rolling any old 401(k) funds into your current 401(k) before you leave. Until you turn 59½, you can withdraw penalty-free only from the 401(k) at your most recent job. Consolidating first puts all that money under the rule. Not all employers accept rollover contributions, especially from retirement plans that aren’t workplace-related.

Wait at least until the year you turn 55 to leave your job. If you leave or lose your job in the year of your 54th birthday, you aren’t eligible for Rule of 55 withdrawals.

Consider waiting until January the year after you retire to withdraw. Taking money out of your 401(k) adds to your taxable income. So if you retire mid-year, you may want to wait until the start of the next calendar year to withdraw. That way, you’re not stacking withdrawals on top of a year’s salary.

You can return to work while continuing to withdraw penalty-free. Once you start using the Rule of 55 to take money out of your most recent 401(k), you’re allowed to start working again, part-time or full-time. You can still withdraw without paying a penalty, but only from the same 401(k) you’ve been tapping for income.

Should You Take Advantage of the Rule of 55?

As the saying goes, just because you can do something doesn’t mean you should.

It’s generally a good idea to leave your retirement account alone as long as possible. Withdrawing your 401(k) money early can sink your future retirement income, especially if the stock market has a couple of down years while you’re taking early withdrawals.

If you retire early, one option is to find freelance or part-time work to bridge the gap before you can start taking Social Security benefits at age 62. That way, your 401(k) investments have more time to grow. (Money expert Clark Howard recommends you wait to take Social Security benefits as long as you can.)

That said, Wes pushes back on the idea that later is always better. His research on retiree happiness points the other way for people who have saved enough: The transition out of work tends to come with a measurable improvement in quality of life, and the Rule of 55 is one of the few tools that makes that transition possible before 59½ without a penalty.

There are a couple of situations where using the rule makes sense:

You’re in a safe position to retire early. If you’re considering retiring early and using the Rule of 55 for income, make sure it’s financially prudent for you. Consider talking to a financial advisor first.

You’re being strategic about your taxes. Withdrawing from a taxable retirement plan during a low-income year could save you some tax money. This is especially true if your taxes may be higher in the future when you plan to take withdrawals.

More Information on Rule of 55 Tax Strategy

It’s a good idea to talk to a financial advisor or a Certified Public Accountant (CPA) specializing in taxes before implementing an early retirement plan.

There are other potential tax reasons to be strategic with early withdrawals.

The IRS says you must take Required Minimum Distributions (RMDs) from your 401(k) starting at 73 years old. The more money that remains in your 401(k), the higher your RMDs will be each year. That could push you into a higher tax bracket.

It may be better to roll some of your 401(k) into a Roth IRA than to take early withdrawals from your 401(k).

You’ll owe immediate taxes on the money you take out of your traditional 401(k), just as you will on any funds you roll into a Roth IRA. Money converted from a traditional 401(k) to a Roth IRA is generally subject to a separate five-year holding period before converted amounts can be withdrawn penalty-free if you’re under age 59½.

IRS Publication 575 provides more guidance on the Rule of 55.

The tax implications of retirement accounts can get complicated quickly, so don’t hesitate to seek professional advice.

Other 401(k) Early Withdrawal Exceptions

Several other circumstances will allow you (or your beneficiary) to withdraw from your 401(k) account before you reach 59½ without paying a 10% penalty.

Some of those include:

The Rule of 72(t). This lets you take penalty-free withdrawals from an IRA or 401(k) at any age through Substantially Equal Periodic Payments. It’s the main option if you’re under 55 or your savings are in IRAs, but it locks you into a payment schedule and requires professional guidance to set up.

Total, permanent disability

Death

Medical expenses that exceed 10% of your Adjusted Gross Income (AGI)

IRS levy

Qualified disasters

Qualified military reservists who are called to active duty

Final Thoughts

The Rule of 55 won’t make an early retirement affordable if you haven’t saved enough. But if you’re already financially prepared, it can give you more flexibility over when you retire by allowing penalty-free access to your current employer’s 401(k) years earlier.

Before you base your retirement plans on this strategy, confirm that your employer’s retirement plan allows Rule of 55 distributions and think through the tax implications of taking withdrawals. If you’re unsure, a financial advisor or tax professional can help you determine whether this approach fits your overall retirement plan.

For many people, leaving retirement savings untouched as long as possible is still the smartest move. But if you’ve done the hard work of building a strong nest egg, the Rule of 55 may be one of the most valuable tools for making an earlier retirement possible.
The post The Overlooked ‘Rule of 55’ Could Unlock an Earlier Retirement appeared first on Clark Howard.