Saving for retirement is a crucial component to any financial plan. It’s not easy, and to make matters worse, factors such as taxes can seriously erode your hard-earned savings.
Luckily, there are some little-known retirement planning rules that can save you money.
Rule of 72(t) and SEPP
If you withdraw funds from an individual retirement account (IRA) or a workplace retirement plan like a 401(k) before the age of 59.5, you’ll generally face an early withdrawal penalty tax of 10 percent in addition to any applicable income taxes.
However, there is a way to bypass the 10 percent penalty. This is permissible through the Rule of 72(t).
The Rule of 72(t) allows you dodge the early withdrawal penalty before reaching age 59.5 as long as you make withdrawals as a series of substantially equal periodic payments (SEPP) that continue for at least 5 years or until you’ve reached age 59.5—whichever is longer.
These withdrawals or payments can be made annually, monthly, or quarterly. They just have to be consistent.
To calculate these payments, you can use one of three preapproved IRS distribution methods. All three plans use one of the IRS life expectancy and mortality tables.
But there are some potential drawbacks. Withdrawals from traditional IRAs and traditional 401(k)s would still be subject to income tax. And once you start the SEPP plan, it can’t be stopped. Also, you can’t make contributions to the account while the plan is in motion. And you can’t take withdrawals that exceed the 72(t) withdrawal amount throughout the plan’s execution.
But this approach can come in handy from a tax-savings perspective for some investors. If you withdraw $40,000 from your account annually, the Rule of 72(t) steers you away from $4,000 in annual penalty taxes. If you’re considering the SEPP plan, you should discuss it with a qualified financial adviser.
Max Out Retirement Accounts
Retirement accounts like traditional 401(k)s and traditional individual retirement accounts allow you to make tax-deductible contributions. As a result, you can cut your tax bill or increase your refund while saving for retirement.
And many retirement accounts have very high contribution limits, which you should aim for if you can.
These limits change annually.
In 2026, you can contribute up to $24,500 to your combined 401(k)s if you’re under the age of 50. If you’re 50 or older, you can make an additional catch-up contribution of $8,000, for a total of $32,500.
But there’s more to it.
If your employer’s plan allows it and you’re between 60 and 63, you can contribute an additional $11,250 in 2026 instead of the $8,000 catch-up contribution.
The rules work a bit differently for individual retirement accounts. But it would help to max these out too.
In 2026, you can contribute up to $7,500 to your total individual retirement accounts if you’re under age 50. You can contribute up to $8,600 if you’re 50 or over.
Roth Accounts
A Roth individual retirement account and Roth 401(k) allow you to make qualified tax-free withdrawals in retirement. That can be very lucrative for someone who has a high income, lives in a high-tax state, or both.
However, you need to be at least 59.5 years old when you withdraw earnings to avoid a 10 percent tax penalty. And you must follow the five-year rule. This states that five years must have passed since the beginning of the tax year when you made your first contribution and when you begin withdrawing earnings to qualify for tax-free withdrawals.
Moreover, Roth accounts don’t involve required minimum distributions. This means your funds can keep growing throughout your lifetime without any requirement to make withdrawals at any particular time.
Make a QCD
Required minimum distributions are specific amounts of money you must withdraw from a traditional individual retirement account and traditional 401(k) when you turn age 73 or 75 if born in 1960 or later. Depending on the size of your required minimum distribution, it can push you into a higher tax bracket and launch other tax torpedoes. Plus, you need to take your required minimum distribution each year or face severe tax penalties.
But there are many ways to reduce the impact of required minimum distributions. One is a qualified charitable distribution. This allows those who are 70.5 years old or older to donate up to $111,000 in 2026 directly from their traditional individual retirement accounts to an IRS-qualified charity or charities. The qualified charitable distribution can satisfy your required minimum distribution, and it won’t count as taxable income.
The Bottom Line
Taxation can take a toll on your hard-earned retirement savings. But thanks to some rules built into the system, you may have some protections. You can reduce your taxable income by maximizing pre-tax accounts like traditional 401(k)s, making qualified tax-free withdrawals from Roth individual retirement accounts, or making qualified charitable distributions if you’re eligible instead of taking your required minimum distribution.
The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
