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Hi I'm going for the bird in the hand
Old 10-21-2009, 10:32 PM   #1
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Hi I'm going for the bird in the hand

I am taking early retirement from my airline at age 57.

A couple of wrinkles, how bad is the penalty before age 59.5,

I am currently on medical but am not taking the airline medical pay, because I have to retire to secure my lump sum distribution (plan is severely underfunded).

I have some debts to pay off from the lump, I know I will take a hit tax wise.

I'm taking the bird in the hand, how best to handle it?
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Old 10-22-2009, 08:11 AM   #2
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Welcome to the forum. I don't know right off if we have any retired pilots, but it is always a good idea to check with a CPA before you make some of these decisions.

Good luck!
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Old 11-20-2009, 11:11 AM   #3
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I believe you can roll over your lump sum into an IRA. Then take out only the amount you need to pay your debt service.

You might have a loophole in starting withdrawals early because of your medical disability.
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Old 11-20-2009, 11:44 AM   #4
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or... you may be able to roll over into an IRA and begin a 72t to withdraw without incurring tax penalty.
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Old 11-20-2009, 03:10 PM   #5
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If you can access under disability that is best because that eliminates the 10% early penalty. I have heard that the IRS is not quite as picky as SS Disability. If you have a 401K, that can be accessed without penalty as long as you leave it at the company since you are severing after age 55. The 72T from a lumpsum rollover of pension to an IRA will also work to eliminate the 10% penalty. It can be great but it MUST run for a minimum of 5 years and past the age of 59 and 1/2.

Also, welcome aboard!
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Old 11-20-2009, 03:58 PM   #6
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Welcome TO=L! We have some pretty smart folks here and if they don't have an answer, they know where to get it.

We have a pretty good search function here (use the bottom Google search box), so you take advantage of past wisdom there and in the Early Retirement FAQs on common topics
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Old 11-20-2009, 09:24 PM   #7
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I know for a fact that you can take structured monthly distributions prior to age 59 1/2 and not trigger the early withdrawal penalty. You should be able to find something regarding this on the IRS.gov website. I think a lump sum distribution would be the only thing to set off the penalty. Check it with a tax expert.
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