Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
72(t) question
Old 04-12-2010, 12:29 PM   #1
Confused about dryer sheets
 
Join Date: Apr 2010
Location: Wilmington
Posts: 5
72(t) question

Hello all,

I am planning to take 50K out of a 401K I got in a divorce settlement to pay off debt, and yes I know what a hit it is going to be, but really have no choice... It was his 401K and I will still have about 150K left. I will also be getting about 250-300K from a pension in a few years.... I also plan on working for about 10 more years and I earn 60K a year...

Here is my question-- I am planning on the 401K going into the IRA and will use the 72(t) to have extra income for some other things... My question is-- if I leave the whole 200K in there until the IRS approves it (or however that works) will I have a larger amount coming every month? It seems like that is the way it works. But, this whole thing is very confusing to me anyway.... Any feedback??
__________________

__________________
mdebluz is offline   Reply With Quote
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!

Old 04-12-2010, 03:56 PM   #2
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
You didn't say how old you were. Distributions depend on your age, an IRS defined "reasonable interest rate" and 1 of 3 amortization methods. If you are 40 (or so) years old then you can take out, penalty free, around 4.33% of the balance every year (that's $2165/year or $180/month for a $50k account). At 50 years old it's maybe 4.88% and so on.

What people do is figure out how much they need and then they leave only that amount in a particular IRA account which gets the 72t treatment. Other money gets transferred to a different account.

The IRS makes you go by the letter of the law. Mistakes can be costly here. If your money is in a mutual fund then the mutual fund company can help you set up a 72-t.

Notice that the withdrawals are penalty free but not income tax free.

Also once you start taking distributions you must continue for at least 5 years.

here's a fun calculator:

72(t) Calculator - Financial Calculators from Dinkytown.net


You need to read about 72t withdrawals:

http://72t.net/

http://fairmark.com/forum/read.php?2,7984

a 72t Works | 72t Distribution | 401k Rollover | IRS 72t | 72(t) Calculator
__________________

__________________
MasterBlaster is offline   Reply With Quote
Old 04-13-2010, 09:35 AM   #3
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by MasterBlaster View Post
You didn't say how old you were. Distributions depend on your age, an IRS defined "reasonable interest rate" and 1 of 3 amortization methods. If you are 40 (or so) years old then you can take out, penalty free, around 4.33% of the balance every year (that's $2165/year or $180/month for a $50k account). At 50 years old it's maybe 4.88% and so on.

What people do is figure out how much they need and then they leave only that amount in a particular IRA account which gets the 72t treatment. Other money gets transferred to a different account.

The IRS makes you go by the letter of the law. Mistakes can be costly here. If your money is in a mutual fund then the mutual fund company can help you set up a 72-t.

Notice that the withdrawals are penalty free but not income tax free.

Also once you start taking distributions you must continue for at least 5 years.

here's a fun calculator:

72(t) Calculator - Financial Calculators from Dinkytown.net


You need to read about 72t withdrawals:

72t.Net | SEPP Plans | IRC Section 72(t) | 72t Distribution | IRC Section 72(q) | yyyZ.Com

Fairmark Forum :: Retirement Savings and Benefits :: 72t withdrawals

a 72t Works | 72t Distribution | 401k Rollover | IRS 72t | 72(t) Calculator
(emphasis added) Isn't that five years or until age 59-1/2, whichever is longer?
__________________
kyounge1956 is offline   Reply With Quote
Old 04-13-2010, 09:36 AM   #4
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by kyounge1956 View Post
(emphasis added) Isn't that five years or until age 59-1/2, whichever is longer?
Correct.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Macbook Question/Printer Question kaneohe Other topics 5 10-15-2009 08:35 AM

 

 
All times are GMT -6. The time now is 12:47 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.