This is not meant to be a catch all for everything regarding IRA's or 401k's, but instead a starting point to bring more awareness to the fact that you can withdraw without taking a 10% penalty using the following methods specifically if you want to live off of that money to retire early.
IRAI will start by saying, if you have a Roth IRA, you are able to withdraw your initial contributions at any time. If you have a Traditional IRA, keep reading....
There is a method called a Roth IRA Conversion Ladder. The basics of this method are that you can convert a set amount of your Traditional IRA to a Roth IRA, and withdraw that money after 5 years, without incurring a 10% penalty. You pay taxes at the time of the conversion, and not when you actualy withdraw the money from the ROTH.
Lets paint a scenario. I am 35 but want to retire at age 40. At that point, I want to start withdrawing $5,000 from my Traditional IRA to help pay my expenses during retirement. I would start this ladder at age 35 and create a Roth IRA account. I pay taxes at age 35 of the $5,000 I converted. At Age 40, I could then withdraw $5,000 from this Roth IRA and not incur the 10% penalty nor would I owe additional taxes. You would continue converting $5,000 at age 36,37,38 etc.. with each conversion maturing after 5 years so you would have a steady stream of income year after year.
401kThere is a rule in the 401(k) law that actually allows early distributions from your account without paying a 10% penalty. This already applies for buying a first home and some other cases, but the 72(t) basically sets up what is called a "Series of Substantially Equal Periodic Payments". I won't go into the details here as many other articles have written about it in depth. I provide some links below and a quick search will provide many more. The point is that you CAN get part of your 401K account funds without paying a 10% penalty.
The real catch here is that the amount you withdraw is set by the government. You can't just simply state what you think you need and it happens. Also the rules are very stringent and if you do not follow them exactly, there are some severe penalties.
My advice is to use the Roth Conversion Ladder first as it is a bit more flexible and forgiving. If any of this information is misleading or wrong please let me know.
More Info about 401k 72(t):
More info on Roth IRA Ladders:
Standard Rules for Roth IRA: