Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Heads up on possible 72t change
Old 03-10-2010, 09:56 PM   #1
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,405
Heads up on possible 72t change

Hi all,

My parents' CPA newsletter indicated that there is a potential for Congress to add additional 72t exceptions. One of the potential new exceptions caught my eye: if you're unemployed. Seems like that could be a nice loophole, depending on how they write the law.

Sorry, I don't have any additional information.

2Cor521
__________________

__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 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 03-10-2010, 10:05 PM   #2
Thinks s/he gets paid by the post
Leonidas's Avatar
 
Join Date: May 2006
Location: Where the stars at night are big and bright
Posts: 2,847
Well, as long as they don't do it the same way as they wrote the exception for the unemployed using the money for health-insurance premiums (actually collecting unemployment benefits for x weeks), that might be real cool. Did a lightweight search myself and couldn't find anything.
__________________

__________________
There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
Leonidas is offline   Reply With Quote
Old 03-11-2010, 08:18 AM   #3
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by SecondCor521 View Post
One of the potential new exceptions caught my eye: if you're unemployed. Seems like that could be a nice loophole, depending on how they write the law.
Interesting. If it means what I think it means, the proposal would allow people to use 72(t) for income if they become unemployed, and could stop before age 59.5 if they found work again?

It seems to me that a lot of the proposals out there are based on the feeling that unemployment will remain high -- and "real" unreported unemployment well into double digits -- for years to come. And with that comes the feeling that more "creative" ways to cope with long-term high unemployment are needed.
__________________
"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
Old 03-11-2010, 08:21 AM   #4
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 174
And at the same time the Federal/State governments get income tax on the withdrawls
__________________
jwkde is offline   Reply With Quote
Old 03-11-2010, 11:03 AM   #5
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
the 72(t) still "controls" the amount of the withdraw right (substantially equal periodic payments) using one of three methods to calculate...

right?

is this a loophole to work around

"substantially"
"equal"
or "periodic"

for anyone which wants to quit a job and FIRE?
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 03-11-2010, 11:09 AM   #6
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by jIMOh View Post
the 72(t) still "controls" the amount of the withdraw right (substantially equal periodic payments) using one of three methods to calculate...

right?

is this a loophole to work around

"substantially"
"equal"
or "periodic"

for anyone which wants to quit a job and FIRE?
I am not certain, however I believe that they are referring to "hardship" withdrawals. Evidently they are considering adding unemployment to already covered medical, imminent foreclosure, college tuition, and to buy a primary residence definitions of hardship.

The "substantially" "equal" or "periodic" issues are how you can get money out without penalty absent a hardship
__________________
MasterBlaster is offline   Reply With Quote
Old 03-11-2010, 11:57 AM   #7
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by jIMOh View Post
for anyone which wants to quit a job and FIRE?
But in reality, how many people who are truly using 72t to retire are going to stop taking income before age 59.5, anyway? Seems to me that most people who need to tap into some of their IRAs won't really have any other income sources available until they turn 59.5 (other IRAs and 401Ks available) or 62+ (SS eligibility).

About the only way I can see many FIREees needing 72t and stopping before 59.5 is if (a) they get a j*b to replace the income from 72t or (b) the market is so bad that they'd sooner tap non-retirement savings than "sell low" (if they are heavily invested and don't have cash/bonds in the IRA to sell first).
__________________
"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
Old 03-11-2010, 03:47 PM   #8
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
Quote:
Originally Posted by ziggy29 View Post
But in reality, how many people who are truly using 72t to retire are going to stop taking income before age 59.5, anyway? Seems to me that most people who need to tap into some of their IRAs won't really have any other income sources available until they turn 59.5 (other IRAs and 401Ks available) or 62+ (SS eligibility).

About the only way I can see many FIREees needing 72t and stopping before 59.5 is if (a) they get a j*b to replace the income from 72t or (b) the market is so bad that they'd sooner tap non-retirement savings than "sell low" (if they are heavily invested and don't have cash/bonds in the IRA to sell first).
Add in the possibility that if the storms were right, I could see doing the following:

1) one spouse working, one spouse FIREing
2) need for a one time distribution from IRA to cover mortgage or create a cash cushion to use for income gap

Meaning if one spouse lost job, and the family relied on 2 incomes, its possible to 72(t) to pay off mortgage or just withdraw ONCE to as to not deplete the savings entirely... pay off a mortgage, keep cash around because in 12 months I lose the unemployment qualification being discussed... or something like that...
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 03-11-2010, 07:55 PM   #9
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,405
Quote:
Originally Posted by jIMOh View Post
the 72(t) still "controls" the amount of the withdraw right (substantially equal periodic payments) using one of three methods to calculate...

right?

is this a loophole to work around

"substantially"
"equal"
or "periodic"

for anyone which wants to quit a job and FIRE?
That would be my hope. I doubt it will turn out that way...from what I've observed our esteemed Congressional representatives usually are very good at considering what loopholes people might come up with and plugging them tightly.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 03-11-2010, 08:12 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
For unemployed exception, it would be great if you could pay the funds back with pre-tax dollars when you found a job like an IRA hardship loan. Many unemployed folks get a severance payout including pension funds and don't have clue what to do other than use the funds it emergency fund is inadequate.
__________________

__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash 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
Laptop Battery Recall - Heads Up freebird5825 Other topics 4 05-18-2009 11:08 AM
Any POT heads on here? Trapshooter Stock Picking and Market Strategy 7 05-10-2008 06:44 PM
Shower Heads Rustic23 Other topics 15 12-19-2007 07:01 AM
Vanguard Heads-UP--Rant? nwsteve FIRE and Money 20 11-08-2007 03:13 PM
Penfed Heads-up Bob_Smith FIRE and Money 8 02-26-2004 02:33 PM

 

 
All times are GMT -6. The time now is 10:03 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.