How to get to your retirement account BEFORE 591/2 without penalty….Rule 72T

Contrary to many cookie cutter recommendations there are situations when it makes sense to draw from the so-called sacred IRA or other type of qualified retirement plan before 59 1/2.  While not a regular occurrence, it is possible and perfectly legal. Examples of early distribution needs include tax and required minimum distribution minimization, along with oversized qualified pool depletion techniques.Rule

Rule 72T allows investors with certain restrictions to withdraw from their IRA or other similar type qualified accounts.

Here are the main details:

  • The investor must take substantial equal periodic payments for at least 5 years or until age 59 1/2 which ever is longer
  • Distribution amounts are determined by mortality and distribution rate assumptions and CANNOT be changed once commenced
  • Distribution amounts can be controlled through account segregation size

This is one of the techniques that should carry a warning, “Do not try this at home by yourself” as there are many pitfalls that can cause excruciating tax pains if done incorrectly. However, established correctly, monitored, and carefully planned, rule 72T can be a life savior in some circumstances allowing early (pre age 59 1/2) non-penalty withdrawals.

Have a great day!


PS Just as the warning says, this is not for the faint of heart and also this post is not a recommendation to complete this technique, careful consideration is needed and every situation is different.

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