|
|
Is 72T bad idea at age 55 if only plan on 5 yr withdrawl
07-14-2016, 07:08 PM
|
#1
|
Confused about dryer sheets
Join Date: Jul 2016
Location: Amelia Island
Posts: 5
|
Is 72T bad idea at age 55 if only plan on 5 yr withdrawl
I am 55 1/2 and need appx 1k/mo for couple yrs to assist in some upcoming necessities. Still work P/T making good wage. Hope to continue for another 10. Actually enjoy the job. Figure 5 yrs will be all I need to tap into retirement. Why does this seem to freak people out. We are not rich by no means but have spent the last 30yrs saving for such situations. Anybody ever utilize the 72T for anything similar.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
Is 72T bad idea at age 55 if only plan on 5 yr withdrawl
07-14-2016, 07:27 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,927
|
Is 72T bad idea at age 55 if only plan on 5 yr withdrawl
Recommend you Google the Mad Fientist blog. He just posted this week on creative ways to get at retirement income in tax-advantage accounts before 59.5. You might be interested in the Roth Conversion Ladder, for example. Good luck.
|
|
|
07-14-2016, 11:22 PM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,012
|
If you need the cash, then you need it.
I don't see anything wrong with it, but be sure to split your IRA so that you have a special one to operate the 72t upon. That way dire emergencies can be met with the other IRA and only a 10% penalty.
The 72t rules are strict, which is why you want to split the IRA first (there is no limit on how many IRA's you can have).
|
|
|
07-15-2016, 05:38 AM
|
#4
|
Thinks s/he gets paid by the post
Join Date: Jan 2014
Posts: 1,174
|
Quote:
Originally Posted by Markola
Recommend you Google the Mad Fientist blog. He just posted this week on creative ways to get at retirement income in tax-advantage accounts before 59.5. You might be interested in the Roth Conversion Ladder, for example. Good luck.
|
I just bookmarked that article a couple of days ago. Here is the direct link: How to Access Retirement Funds Early
OP, if you have a Roth IRA you may be able to withdraw the contributions anytime as mentioned in this article.
http://www.mymoneyblog.com/can-i-rea...r-penalty.html
|
|
|
07-15-2016, 03:53 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,012
|
I was hoping there would be something new at Mad Fientist blog , but not for me, so I'll mention another source of cash.
You would need to run the numbers for your situation to see if it works out for you.
Take out a HELOC on your house, so basically borrow against your house each year and after you turn 59.5 then you can pay off the borrowed money.
Advantages are initially as you borrow $1,000 per month the interest is low, no real need to yank out the full 5 years worth of money in the first month as you will pay way too much interest over the 5 years.
|
|
|
Is 72T bad idea at age 55 if only plan on 5 yr withdrawl
07-17-2016, 05:40 PM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,927
|
Is 72T bad idea at age 55 if only plan on 5 yr withdrawl
The Mad Fientist isn't one to use debt of any kind. HELOC loans can be called by the bank, sometimes due to change in the borrower's income and employment status, such as ER. Dave Ramsey argues against HELOCs in "Total Money Makeover," for example. I wouldn't risk my house this way, though folks have different risk tolerances and YMMV. If one plans to borrow to bridge the gap into retirement, at least compare the fine print between HELOCS, second mortgages and 401k loans.
|
|
|
07-17-2016, 05:54 PM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,012
|
Other options:
would be reduce those ongoing expenses that if you really examine them are wasteful.
Perhaps you can go with pre-paid cell phones, and internet phones.
Lots of folks do over the air free HD tv instead of $120/mo cable.
Sell your house and rent a place instead, this will also free you up for the often considered move to a better place, warmer place, cooler place, smaller house, etc.
Are these couple of years - meaning 2 years of necessities, really necessities or simply wants ?
|
|
|
07-17-2016, 06:13 PM
|
#8
|
Confused about dryer sheets
Join Date: Jul 2016
Location: Amelia Island
Posts: 5
|
I will only be pulling appx. 14k a year in equal monthly payments and will stop after 5 because I will be 61 1/2 and should still be working my P/T gig. Total taken close to 75k. If I make 2% on that IRA for that period it ends up about a 40k reduction. Problem is Fidelity management is no better then my 4 yr old grandaughter at managing money. But that said I have moved money to 3 different institutions and all I end up doing is breaking even after my fee. So I figure might as well leave it there because surely not everyone invested with Fidelety managed IRA's s are getting spanked. At least I'd like to hope not.
|
|
|
07-17-2016, 10:26 PM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,012
|
It's the fees that really take out a chunk and some places are higher than others, and some funds those places put you into are very expensive.
If you are not sure about your situation.
You could detail out what funds your IRA is in at the Bogle head forum or even here and folks can tell you if it's good or not.
I have seen one place take 2% yearly fee, plus put a person into 20 different funds each with their own expenses and all this on a $100K IRA.
As I know this fellow, I got him to move it to Vanguard to save the $2,000 a year fee and then put it into a few index ETF's at expense rates of .15 to .05 , saving him about another $500 in fund expenses each year.
|
|
|
07-17-2016, 10:45 PM
|
#10
|
Confused about dryer sheets
Join Date: Jul 2016
Location: Amelia Island
Posts: 5
|
I would really like to find a place that could get me 4-5% returns. I'm not even sure that's realistic. I would rather not play with the money its just not something I want to do that often. Problem is who do you trust that actually would offer such a managed portfolio. If you have any suggestions we are very open to them. I am not afraid to move the money as I have told everyone who has managed it I will pull it if all i'm doing is making your house payments. Apparently they don't care. And I have been moving it but its getting old. The Vanguard thing may be something to look at. I would appreciate any info anybody has to offer. Thank you very much for the responses.
|
|
|
07-17-2016, 11:41 PM
|
#11
|
Recycles dryer sheets
Join Date: Nov 2014
Posts: 150
|
Birdoctor, a lot of folks on this forum follow a low-cost largely-passive/index style of investing. Here's a good starting point for learning how to manage your own investments: https://www.bogleheads.org/wiki/Getting_started
As for a 72t, it definitely is an option. Sunset pointed out some strategies (ex splitting up the IRAs and only SEPP-ing one of them). Here's another bogleheads article that may be helpful: https://www.bogleheads.org/wiki/Subs...iodic_payments
You mentioned people freaking out over your prospect of doing one. Part of that could come from the non-traditionality of the 72t strategy and in early retirement in-general. If you've formed and tested your plan well, who cares what others think... unless its your spouse
__________________
The kids used to call me Captain Slow; now they also use Captain Cheap. I tell them, "Talk to the portfolio!"
|
|
|
07-17-2016, 11:50 PM
|
#12
|
Confused about dryer sheets
Join Date: Jul 2016
Location: Amelia Island
Posts: 5
|
Thanks ya'll I will be checking these out. I don't totally mind managing my money I just am not interested in playing the market. Like watching and studying stocks and things like that. I will resesrch these siggestion before I 72T it up. Thanks again.
|
|
|
07-20-2016, 03:25 PM
|
#13
|
Full time employment: Posting here.
Join Date: Dec 2012
Location: Chandler, AZ
Posts: 741
|
I'm surprised the Mad Fientist article didn't point out that you can withdrawn $ from your employer's 401k between the ages 55 and 59 1/2, penalty free, as long as you were employed with them at age 55. May not apply in your situation since you are still working P/T.
|
|
|
07-20-2016, 04:54 PM
|
#14
|
Confused about dryer sheets
Join Date: Jul 2016
Location: Amelia Island
Posts: 5
|
I do still work P/T for the same employer but im in the aviation business and change is always lurking and I would rather not go full time again as I have been in the business 40 yrs but still like playing with the planes. I know you cant just sit around when you retire or you won't be around long. This said the little extra cash from the 72T will maybe be the difference from me having to go back full time and chase the dollar again.
|
|
|
07-20-2016, 05:53 PM
|
#15
|
Full time employment: Posting here.
Join Date: Aug 2013
Location: New Jersey
Posts: 910
|
401K plans typically allow loans. Since you are still working for the same employer that has your 401K - this seems like a better solution than a 401K withdrawal and 10% penalty. There are some downsides - you will need to pay back the loan in full if fired. Also, check with your employer on the tax rate for the loan distribution.
|
|
|
07-20-2016, 06:01 PM
|
#16
|
Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,927
|
Quote:
Originally Posted by Trooper
I'm surprised the Mad Fientist article didn't point out that you can withdrawn $ from your employer's 401k between the ages 55 and 59 1/2, penalty free, as long as you were employed with them at age 55. May not apply in your situation since you are still working P/T.
|
The Mad Fientist is in his 30s and writes for that cohort, mostly. Commenters to his post quickly pointed out that 55+ route, which is what I'll likely do myself 5 years from now, relative geezer I apparently am
|
|
|
07-20-2016, 06:37 PM
|
#17
|
Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,878
|
Started my 72T when I was 55 and have no regrets. Wasn't that hard to set up but just make sure you know the rules as the IRS will scrutinize returns because the 1099R will be coded as a 1 (normal distribution) in box 7. You will need to complete a 5329 form to show you are taking the 72T and don't have to pay the 10% penalty. There are plenty good resources on the net about how to calculate a 72T and it's not a bad idea to have an accountant give you a sanity check on the numbers. Just to be safe I continued my 72T distribution for six years just to cover my butt. Oh, and the IRS did send me letter questioning my 72T in the second year but was happy with my response.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
|
|
|
07-20-2016, 07:55 PM
|
#18
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
|
Quote:
Originally Posted by Markola
The Mad Fientist isn't one to use debt of any kind. HELOC loans can be called by the bank, sometimes due to change in the borrower's income and employment status, such as ER. Dave Ramsey argues against HELOCs in "Total Money Makeover," for example. I wouldn't risk my house this way, though folks have different risk tolerances and YMMV. If one plans to borrow to bridge the gap into retirement, at least compare the fine print between HELOCS, second mortgages and 401k loans.
|
I don't think that statement is correct... a bank has no right to call a HELOC unless it is in the contract... they would have to abide by the contractual terms of the HELOC.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
07-22-2016, 08:11 PM
|
#19
|
Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,927
|
Fair enough. Correction: "HELOC loans can be called according to their specific terms."
|
|
|
07-22-2016, 08:17 PM
|
#20
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
|
But you aren't getting it... there usually is not any right for a bank to call a HELOC... once they have funded the HELOC as long as you pay according to the contract there is nothing they can do to call/accelerate the loan, so I don't understand what the alleged "risk" is.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|