Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
ER date set to avoid 72t
Old 09-21-2011, 08:52 AM   #1
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,834
ER date set to avoid 72t

Has anyone else set their ER date to avoid having to do a 72t? I'm hanging on at work until the mortgage is paid off and my after tax savings are sufficient to get me to 59.5 (that's 9 years).
__________________

__________________
nun 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 09-21-2011, 09:37 AM   #2
Thinks s/he gets paid by the post
Brett_Cameron's Avatar
 
Join Date: May 2011
Location: South Eastern USA
Posts: 1,010
72t on IRA? I have a 401k. The plan administrator pushes the idea of rolling to an IRA as soon as you retire. For me, that would have invoked the need for 72t to retire at 55. After much research into my plan's provisions, I discovered the ability to make installment withdrawals from the 401k prior to age 59.5 without invoking the IRA type 72t exceptions (SEPP). I did not roll over to an IRA. Once that was determined then waiting to 59.5 was not a factor. Mortgage is not paid off either. I retired at 55 once I qualified for pension and retiree health benefits. YMMV
__________________

__________________
Brett_Cameron is offline   Reply With Quote
Old 09-21-2011, 09:50 AM   #3
Confused about dryer sheets
 
Join Date: Jan 2010
Location: Housotn
Posts: 6
Quote:
Originally Posted by gsparks2 View Post
72t on IRA? I have a 401k. The plan administrator pushes the idea of rolling to an IRA as soon as you retire. For me, that would have invoked the need for 72t to retire at 55. After much research into my plan's provisions, I discovered the ability to make installment withdrawals from the 401k prior to age 59.5 without invoking the IRA type 72t exceptions (SEPP). I did not roll over to an IRA. Once that was determined then waiting to 59.5 was not a factor. Mortgage is not paid off either. I retired at 55 once I qualified for pension and retiree health benefits. YMMV
Actually, it is the year you attain 55 not the precise date of birth, so if your birthday is December 15 and you'll turn 55 say this year, you'd have been good to go as early as January 1, 2011 on an early retirement basis (provided you're in a plan with an age 55 early retirement age). If your plan doesn't have an age 55 ER provision you're stuck with 72(t) installments or waiting until 59-1/2 to avoid the early withdrawal penalties.
__________________
Sparty is offline   Reply With Quote
Old 09-21-2011, 09:58 AM   #4
Thinks s/he gets paid by the post
Brett_Cameron's Avatar
 
Join Date: May 2011
Location: South Eastern USA
Posts: 1,010
I actually turned 55 in 2010 and will not turn 56 until later this year. But my mind was not fixated on early retirement last year.
__________________
Brett_Cameron is offline   Reply With Quote
Old 09-21-2011, 12:01 PM   #5
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,219
Quote:
Originally Posted by nun View Post
Has anyone else set their ER date to avoid having to do a 72t? I'm hanging on at work until the mortgage is paid off and my after tax savings are sufficient to get me to 59.5 (that's 9 years).
Partly yes, partly because I think now is a good time to be adding to your investments as oppose to pulling $ out.
TJ
__________________
teejayevans is offline   Reply With Quote
Old 09-21-2011, 12:25 PM   #6
Thinks s/he gets paid by the post
DFW_M5's Avatar
 
Join Date: Sep 2003
Posts: 4,980
When mega corp came out with what appeared to be the last favorable buyout package, I took it and retired at 54, but later decided to go back to work partly due to this and a few other factors.
__________________
DFW_M5 is offline   Reply With Quote
Old 09-21-2011, 12:39 PM   #7
Recycles dryer sheets
 
Join Date: Feb 2011
Location: anywhere usa
Posts: 246
What's so bad about doing a 72t?
__________________
pimpmyretirement is offline   Reply With Quote
Old 09-21-2011, 01:15 PM   #8
Thinks s/he gets paid by the post
Brett_Cameron's Avatar
 
Join Date: May 2011
Location: South Eastern USA
Posts: 1,010
Quote:
Originally Posted by pimpmyretirement View Post
What's so bad about doing a 72t?
Nothing bad about it except a little loss of flexibility.
__________________
Brett_Cameron is offline   Reply With Quote
Old 09-21-2011, 02:13 PM   #9
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,834
Quote:
Originally Posted by pimpmyretirement View Post
What's so bad about doing a 72t?
It's partly psychological, but mostly I want to use the years with low income between ER and pensions and SS starting to do IRA to ROTH rollovers up to the top of the 15% tax bracket.
__________________
nun is offline   Reply With Quote
Old 09-21-2011, 02:17 PM   #10
Recycles dryer sheets
 
Join Date: Dec 2009
Location: Cleveland
Posts: 343
Quote:
Originally Posted by nun View Post
Has anyone else set their ER date to avoid having to do a 72t? I'm hanging on at work until the mortgage is paid off and my after tax savings are sufficient to get me to 59.5 (that's 9 years).
I am 44 right now but will be counting on the 72t to be able to quit at 52 or 53 as most of my assets are tied up in IRA and 401k accounts. It does seem a bit complicated and a bit of a hassle but it sure beats the alternative....which is working!
__________________
skyvue is offline   Reply With Quote
Old 09-21-2011, 02:41 PM   #11
Recycles dryer sheets
 
Join Date: Feb 2011
Location: anywhere usa
Posts: 246
Quote:
Originally Posted by nun View Post
It's partly psychological, but mostly I want to use the years with low income between ER and pensions and SS starting to do IRA to ROTH rollovers up to the top of the 15% tax bracket.
I hadn't thought about it like that.

I guess my plan includes paying the mortgage off before I consider myself FI, but I still expect to use a 72t. I doubt I'll ever be outside the 15% tax bracket in retirement though. For a married couple in 2011, that's an adjusted gross income of $69k. With no mortgage and only 15% taxes, $69k allows for a lot of exciting times.

The lack of flexibility I understand. I've been under the impression if one has multiple IRA accounts, they can choose to 72t them at seperate times. I was hoping to do that to keep some flexibility. I could certainly be wrong about it being allowed though.
__________________
pimpmyretirement is offline   Reply With Quote
Old 09-21-2011, 02:51 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Location: Los Angeles area
Posts: 1,432
Quote:
Originally Posted by pimpmyretirement View Post
The lack of flexibility I understand. I've been under the impression if one has multiple IRA accounts, they can choose to 72t them at seperate times. I was hoping to do that to keep some flexibility. I could certainly be wrong about it being allowed though.
Yes, each IRA supports its own independent set of 72t withdrawals. I have had 2 IRAs providing 72t income since 2006 and 2007. I would have had to wait about 7 more years to retire without the 72t option.
__________________
learn, work, save, invest, fire
CyclingInvestor is offline   Reply With Quote
Old 09-21-2011, 05:35 PM   #13
Moderator
Ronstar's Avatar
 
Join Date: Aug 2007
Location: A little ways southwest of Chicago
Posts: 9,336
Quote:
Originally Posted by nun View Post
Has anyone else set their ER date to avoid having to do a 72t? I'm hanging on at work until the mortgage is paid off and my after tax savings are sufficient to get me to 59.5 (that's 9 years).
Yes, I put together a plan in 2009 that established an ER date of 02/2011 based on withdrawals from after tax savings ending at age 59.5 in 2015. But I never did fully RE, just reduced my part time hours. Now I'm working just enough to cover most of my expenses and max out my 401k contribution. Im just waiting for DW to RE and then I'll do the same.

Your plan sounds like a good one.
__________________
Ronstar is offline   Reply With Quote
Old 09-22-2011, 07:05 AM   #14
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,219
BTW, the rate which you use to calculate 72t withdrawals has been dropping, might want to recalculate if you haven't lately.
TJ
__________________
teejayevans is offline   Reply With Quote
Old 03-16-2013, 09:54 AM   #15
Recycles dryer sheets
 
Join Date: Jan 2013
Location: Camas, WA
Posts: 96
Quote:
Originally Posted by Sparty View Post
Actually, it is the year you attain 55 not the precise date of birth, so if your birthday is December 15 and you'll turn 55 say this year, you'd have been good to go as early as January 1, 2011 on an early retirement basis (provided you're in a plan with an age 55 early retirement age).
This is great news that I was not aware of and has moved my conservative targeted RE date up to Jan of 2015! In most models, we are actually FI by Jan of 2014, so I am trying to decide if the flexibility of staying away from a SEPP is worth OMY? Thoughts?

PS. I know this is an old thread, but why start over. It deserves resurrection
__________________
cinman2000 is offline   Reply With Quote
Old 03-16-2013, 06:12 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 1,433
When I discovered that my 401k did not allow partial or installment w/d's after 55 it kind of set me back. My original plan was based on the ability to take w/d's after age 55 if you had 10 years of service. I thought I had it made. However the options were to take an annuity, take the entire sum or roll it over into an IRA. The rollover is the only viable option for me. However you can not w/d without penalty prior to 59 1/2 unless you go the 72t route. My current plan is to work until I'm close enough to 59 1/2 to live on taxable savings for a bridge.
__________________
Retired in 2016. Living off dividends / interest and a mini pension. Freedom.
foxfirev5 is offline   Reply With Quote
Old 03-17-2013, 09:38 AM   #17
Recycles dryer sheets
 
Join Date: Jan 2013
Location: Camas, WA
Posts: 96
Quote:
Originally Posted by foxfirev5 View Post
When I discovered that my 401k did not allow partial or installment w/d's after 55 it kind of set me back. My original plan was based on the ability to take w/d's after age 55 if you had 10 years of service. I thought I had it made. However the options were to take an annuity, take the entire sum or roll it over into an IRA. The rollover is the only viable option for me. However you can not w/d without penalty prior to 59 1/2 unless you go the 72t route. My current plan is to work until I'm close enough to 59 1/2 to live on taxable savings for a bridge.
I am curious what you see as the issue with the 72t route. I know there is some loss of flexibility for 5 years, but if you can keep the 72t distribution low enough to avoid getting outside the 15% bracket, and then supplement with after tax funds, where is the big setback?
__________________
cinman2000 is offline   Reply With Quote
Old 03-17-2013, 10:05 AM   #18
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 1,433
Quote:
Originally Posted by cinman2000 View Post
I am curious what you see as the issue with the 72t route. I know there is some loss of flexibility for 5 years, but if you can keep the 72t distribution low enough to avoid getting outside the 15% bracket, and then supplement with after tax funds, where is the big setback?
l

I guess if I really felt and urgent need to quit working the 72t would certainly be an option. However, lack of flexibility of a low distribution might hinder me in a few years. Who know's for sure? At this point my work is getting progressively less stressful. To the degree that going to work is less hassle than figuring out the 72t. However that can change at any moment.
__________________
Retired in 2016. Living off dividends / interest and a mini pension. Freedom.
foxfirev5 is offline   Reply With Quote
Old 03-17-2013, 10:36 AM   #19
Recycles dryer sheets
 
Join Date: Jan 2013
Location: Camas, WA
Posts: 96
Quote:
Originally Posted by foxfirev5 View Post
l
At this point my work is getting progressively less stressful. To the degree that going to work is less hassle than figuring out the 72t. However that can change at any moment.
Makes sense, if I was in your shoes I would probably do the same. My stress seems to increase almost daily these days, so the hassle of the 72t seems worth it.
__________________

__________________
cinman2000 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
Link To This Set of Data Rustward FIRECalc support 16 10-23-2011 08:29 AM
Federal Agency Set to Sue Major Banks Today or Tuesday Retire Soon FIRE Related Public Policy 39 09-07-2011 10:24 AM
ER before 59.5 and 72t nun FIRE and Money 5 09-01-2011 03:48 PM
How to avoid an awkward prenup discussion when you have adult children... Nords FIRE and Money 24 08-12-2011 11:08 AM

 

 
All times are GMT -6. The time now is 02:00 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.