Withdrawing from retirement accounts

[Michelle McGinty]

I just recently stumbled upon the FIRE community and BiggerPockets. Seems to me that many people who have achieved FIRE got there by maxing out their tax advantaged retirement accounts and then use the 4% rule to live off their nest egg. From what I understand if I retire in my 40s I will incur a penalty for withdrawing from my 401k and Roth IRA early? Typically, do people who retire early just pay the penalty, is there a way around this, or are they using taxable accounts until they reach the typical retirement age? Thanks in advance for any advice!

[Caroline C.]

@Michelle McGinty we are prepared to withdraw from our retirement accounts if needed, but ideally our real estate passive income and other streams of non W2 income we are working to build will be enough to bridge us to the age where we can withdraw from retirement without penalty. While it would be better if some of our early savings were not in our retirement accounts so we'd have more flexibility in getting access to it, we have been able to do real estate investments in a Solo 401(k), so at least we've been able to diversify the investment of our retirement funds.