Retiring in Big Wonderful Wyoming

[ThinkRetirement2010]

Hello to all early retiree hopefulls!!
I am a 53 YO married women - looking forward to 55!! Who ever would have thought a women would look forward to getting older I am a vice president and commercial lender with a $5billion asset financial institution in Wyoming with 30+ years in banking and I can't wait to take early retirement in 2010; and I need help!! I have read differing advise regarding 72(t) distributions from my 401k and would like to hear from you, your real life experience with 72(t)'s

Thanks in advance,
ThinkRetirement2010

[brewer12345]

Think, if we are talking about a 401k and not an IRA, I am lead to believe that you can take distributions starting at age 55. That way you would not have to even bother with a 72t. If your employer does not allow distributions at 55, you could always look into seting up a small business (which might have very little revenue, wink, wink) and roll the money into a solo 401k or small employer traditional 401k.

Anyway, welcome to the forum. at some point I would love to hear what is going on in banking right now, especially how much of a tourniquet the bank regulators are applying.

[Dawg52]

Welcome! What part of WY do you live?

[bigwonderfulwyoming]

Welcome to the forum.

[Leonidas]

The IRS says:

Generally, distributions of elective deferrals cannot be made until one of the following occurs:

• You die, become disabled, or otherwise have a severance from employment.
• The plan terminates and no successor defined contribution plan is established or maintained by the employer.
• You reach age 59½ or incur a financial hardship.

Tax on early distributions. If a distribution is made to you under the plan before you reach age 59½, you may have to pay a 10% additional tax on the distribution. This tax applies to the amount received that you must include in income.

It then lists all the well known exceptions to the application of the penalty. Which include SEPPs and withdrawals made after separation of service provided you didn't separate from your employer until the calendar year you turn 55, etc.

The exact wording is:

Made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55...

Source: 401(k) Resource Guide - Plan Participants - General Distribution Rules

TR2010, if you're not staying until 55, then it sounds like rolling your 401(k) into a traditional IRA and then doing a 72(t) SEPP might be what you are looking for. Or you could go with Brewer's advice (wink, wink), but I haven't done any research in that area. SEPPs are not overly complicated to do, but if you make a mistake it gets to be real expensive in penalties. I really like this site and have found it very informative:

Welcome to 72t on the Net

Edit: Don't know if you are ready to ER now (Ala, I really can't stand this place anymore), if you can do a little less than two more years, or if you can do what Brewer suggests, but I think if I was in your position I would much rather do the "after 55" plan and stick with the 401(k). Mostly because withdrawals from the SEPP have no flexibility once you start, but the distributions from your 401(k) can be either periodic or non-periodic. Flexibility is a nice thing to have.

[ThinkRetirement2010]

Originally Posted by Dawg52

Welcome! What part of WY do you live?

Northern WY in the valley of the Big Horn Mtns. How 'bout you?