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72t, 59 1/2, and confusion
Old 04-01-2008, 11:01 AM   #1
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72t, 59 1/2, and confusion

I'm thinking about doing this next year. For some reason the timing of the 72(t) withdrawls messes me up, especially when they talk about age 59 1/2. Where in the world did that come from? What's the reason for the 1/2, why isn't it just your simple age on your birthday? What I'm confused about is if I take annual distributions, do they have to be taken out on the exact same day every year like clockwork? If I start when I'm 54 1/2, then does it end exactly when I'm 59 1/2 (5 years)? What if it was one day earlier or later - is it that exacting? If I start when I'm 54, then I am confused as to what happens when I turn 59 1/2 or in the year I turn 59 1/2. Do I have to take two payments that year or what. Are we talking about exact timings here or just the entire year that you turn a certain age? Any better clarification would be helpful!
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Old 04-01-2008, 04:49 PM   #2
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I am no expert, but:

1. The reason for the "1/2" is that is the law that Congress passed. Why they chose that number I have no idea.

2. I believe that the withdrawals can be taken in any way you choose as long as the total withdrawn during the tax year (almost always the same as the calendar year) add up to whatever amount you are supposed to withdraw. So no, they don't need to be taken out on the same day every year.

3. The basic rule is "5 years or 59 1/2, whichever is longest", but the last set of questions you are asking are pretty specific -- I would read up on the law and get qualified help -- probably hard to find the latter. You might want to check out The Retire Early Home Page. and look for intercst's or theBadger's reports on 72t's. They are the most knowledgeable people I know on the subject.

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Old 04-01-2008, 04:57 PM   #3
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Quote:
Originally Posted by SecondCor521 View Post
I am no expert, but:

1. The reason for the "1/2" is that is the law that Congress passed. Why they chose that number I have no idea.

2. I believe that the withdrawals can be taken in any way you choose as long as the total withdrawn during the tax year (almost always the same as the calendar year) add up to whatever amount you are supposed to withdraw. So no, they don't need to be taken out on the same day every year.

3. The basic rule is "5 years or 59 1/2, whichever is longest", but the last set of questions you are asking are pretty specific -- I would read up on the law and get qualified help -- probably hard to find the latter. You might want to check out The Retire Early Home Page. and look for intercst's or theBadger's reports on 72t's. They are the most knowledgeable people I know on the subject.

2Cor521
I agree in essence with all of 2Cor521's comments except make that age 59 years 6 months and a few days for IRS fudge factor, leap year etc... Also, read at 72(t) on the Net Discussion Forum where the stated purpose is getting at your funds to be able to fund and enjoy early retirement!

I found their input very valuable before starting my 72T last year.
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Old 04-01-2008, 07:46 PM   #4
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What's the reason for the 1/2, why isn't it just your simple age on your birthday?


I'm sure it's a "design by committee" type deal.
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Old 04-01-2008, 07:52 PM   #5
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I turned 59 1/2 last December, and I can vouch for the fact that nothing magical happens. No bells, no trumpets.

But for the younger forum members, thanks to this crazy rule, something wondrous will happen on that day.
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Old 04-01-2008, 07:53 PM   #6
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I agree in essence with all of 2Cor521's comments except make that age 59 years 6 months and a few days for IRS fudge factor, leap year etc... Also, read at 72(t) on the Net Discussion Forum where the stated purpose is getting at your funds to be able to fund and enjoy early retirement!

I found their input very valuable before starting my 72T last year.
That is one of the best sites on the planet. You can ask any question and count on reliable answers. If you are a rookie, do not be shy to post, they help everyone. You can search through old posts and find everything you need to know. It's aammaazziinngg! I wouldn't 72T without it!
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