Apr 10
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IRS Rule 72t
The IRS rule 72t “equally substantial distribution” provides a means to access retirement savings that are currently in a 401k, 403b, or IRA retirement savings plan prior to age 59 1/2 without incurring the 10% penalty. Here is how it works. If the money you would like to access is in a 401k or 403b retirement savings plan you would 1st need to do a 401k/403b rollover into an IRA (available if you are no longer employed with the employer that sponsored the 401k/403b employer sponsored retirement savings plan).
After the 401k or 403b rollover is completed and the money is now in an IRA, you apply with the IRS for a 72t “equally substantial distribution” and the IRS will offer you three optional payout amounts, based on a number of factors like (your age , age of your beneficiaries, amount of money, % rate of the calculation and life expectancy). There are 72t calculators available online and we should have one here soon that can give you a good idea of how much may be available to you, but do yourself a favor and use the IRS figures.
Whatever option you choose it must continue until age 59 1/2 or a minimum of 5 years whichever comes 1st, and although you will be spared the 10% penalty, the distribution will be counted as earned income in the year received. Done right, it can be very beneficial in a number of situations. Early retirement, loss of employment when prospect for equal earnings do not look good, a desire to fund an equity indexed universal life insurance policy to provide tax-free income in retirement ECT.
Rather than attempting this on your own, do yourself a favor and enlist the aid of a financial professional like a registered investment advisor representative, registered investment representative, life insurance advisor, CPA or other financial professional.
Please Contact Us if you have any questions about this or any topic on this site.
We provide service in the Southern CA. area in and around Orange County CA.
Your Life Advisors
Dean Barwick / Manager (714) 380-4586