401K distribution and age difference of spouse is 9 years?

I am currently 49 and my spouse is 40. When I retire in 13 years at age 62, my wife would also like to retire. We will have between 2 and 2.5 million dollars in 401K accounts, of which 75% will be in my wife's accounts. We would like to live off of the interest only and preserve the principal, but she will only be 53 years old and cannot begin withdrawing from her 401K accounts until she is 59. Should we change our savings strategy and being investing in taxable investments so that we can withdraw the interest from her accounts before she is 59?401K distribution and age difference of spouse is 9 years?
Well...a few different things can happen





1) as the other poster said, stop her deferrels and contribute fully to yours. Build yours up as high as possible.





2) retire in 15 years after your wife has turned 55. The 10% penalty rule applies only if you separate from service PRIOR to age 55. So that's where the 401k is better than the IRA.





or





3) Retire when you wish and take advantage of the 72(t) rule which says that you can avoid the 10% penalty if you take a series of substantially equal payments over the life of the participant and participant's beneficiary. Since they will base them on life expectancy the payments will likely be lower than the interest you're currently earning. Only requirement is that you have to be separated from service (quit), they have to be a series of payments at least annually, and they can't be changed for at least 5 years or until she turns 59 1/2 which ever is later (in your case it's 59 1/2).





So, you can still tap her accounts even though she's not 59 1/2.





Start your research now...72(t). It's sole purpose is to allow people who can afford to retire early to do so without incurring the 10% penalty.401K distribution and age difference of spouse is 9 years?
No. You should change your strategy so that you contribute the max to your 401(k), at the expense of hers if necessary. Stop contributing to hers entirely if you have to in order to fully fund yours.





When you retire, you should spend down your accounts. By the time they are depleted, your wife will be eligible for distribution.