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Old 12-30-2016, 02:30 PM   #21
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The age 55 exception to qualified plan distributions is between you and the IRS. The company/plan administrator is not involved.
well they do have to fill out the 1099. if they mess that up....
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Old 12-30-2016, 02:44 PM   #22
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well they do have to fill out the 1099. if they mess that up....
True -- They could issue you a 1099-R with either code 1 or code 2 listed in box 7. Both would be okay.

If code 1 - "early distribution - no known exception" then you would use the method I described above via form 5329 to waive the 10% penalty.

If code 2 - "early distribution - Early distribution, exception applies" then you should have no additional work to do. Your tax software will not apply the 10% penalty if code 2 is used by the plan administrator.

If they screw up some other part of the 1099-R well then that would likely be a separate issue.

It is good to be careful with this sort of thing. I usually recommend that people take a small distribution (ie $1,000) the first year and then confirm during tax time that everything worked according to plan. In the following year you could take larger amounts with the confidence that you should have by doing it correctly the first year.

-gauss
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Old 12-30-2016, 02:49 PM   #23
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Your correct the IRS says that they can distribute. The proper verbiage has to be in the Summary Plan Description(SPD), some omit this. Then the custodian has to have the ability to do a partial distribution, some don't.
The question of when a plan allows distributions and of what type is separate from the laws that govern the waiver of the 10% penalty under the rule of 55.

Best not to confuse the two issues.

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Old 01-03-2017, 04:36 PM   #24
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Andre- good to see you post some updated figures. I've always taken motivation from your posts because of our similar spending targets and I think I'm following in your footsteps based on what you've previously posted as your milestones. I'm 42 and have $520k in investment/savings. My target being $1.5MM and $60k/yr spending.

I agree with the advice from others because I think you're pretty well set to cover the gap from 51-60 (especially if you continue the contributions for the next 4 yrs as you have been). Oh and I would definitely maintain 2-3yrs worth of cash to cover any sudden market turbulence. However, based on my own calculations I recall I needed about $900k or so in my IRA/401k etc to cover me from 60-85 and this was with $20k SS included starting at age 62. Granted you have 13 years or so before you'd start to withdraw from those accounts I'd add more there and let them grow tax deferred.
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Old 01-03-2017, 10:23 PM   #25
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By the way, I am glad I never made non-deductible contributions to a traditional IRA or 401k. Mingling the two creates another level of bookkeeping. I already have to keep track of the basis of reinvested MF distributions, which gets tedious when they accumulated over decades.
.
We do this. Guess I'm going to be spending some time figuring it out.... Especially since there's deductible contributions in the same account.
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Old 01-07-2017, 10:55 AM   #26
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I've had similar thoughts as OP. I'm 38 with 650k. I want to stop saving mostly once I hit 750k, then pay down the mortgage. Once that's gone, I will either work less or spend more of my money to enjoy the next couple decades while my money grows.I will likely still save in the Roth, but not much more.
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Is it time to start scaling back my 401k?
Old 01-07-2017, 12:56 PM   #27
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Is it time to start scaling back my 401k?

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I've had similar thoughts as OP. I'm 38 with 650k. I want to stop saving mostly once I hit 750k, then pay down the mortgage. Once that's gone, I will either work less or spend more of my money to enjoy the next couple decades while my money grows.I will likely still save in the Roth, but not much more.


I've pondered the same, because it would be nice to pay off the house, but I have so far elected against cutting back 403b contributions, which DW and I both max out, including catch-up provisions. Saving pretax results in approximately a 30% federal and state government subsidy (though, yes, taxes will have to be paid later), plus employer match. I've never found anywhere else completely safe one-year returns in the 35%-range, which then continue predictably year after year, compounding and compounding. It's the best deal around.
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Old 01-08-2017, 03:10 PM   #28
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Originally Posted by dallas27 View Post
I've had similar thoughts as OP. I'm 38 with 650k. I want to stop saving mostly once I hit 750k, then pay down the mortgage. Once that's gone, I will either work less or spend more of my money to enjoy the next couple decades while my money grows.I will likely still save in the Roth, but not much more.
...but will it grow? You should probably consider an SPIA.
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Old 01-08-2017, 08:25 PM   #29
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I just lowered my 401k contribution today from the max to 6% just to get the company match. It hurt to do it but I want to retire asap and I will need to bolster the money I can access before 59 1/2 and I'm not that interested in dealing with a 72t distribution so I bit the bullet. I'll admit I'm kind of bummed about it right now but hopefully it won't prove to be something I regret.
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Old 01-09-2017, 04:48 AM   #30
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Have you considered a Roth rollover ladder as part of your retirement strategy?
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Old 01-09-2017, 07:31 AM   #31
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Originally Posted by dvalley View Post
Andre- good to see you post some updated figures. I've always taken motivation from your posts because of our similar spending targets and I think I'm following in your footsteps based on what you've previously posted as your milestones. I'm 42 and have $520k in investment/savings. My target being $1.5MM and $60k/yr spending.

I agree with the advice from others because I think you're pretty well set to cover the gap from 51-60 (especially if you continue the contributions for the next 4 yrs as you have been). Oh and I would definitely maintain 2-3yrs worth of cash to cover any sudden market turbulence. However, based on my own calculations I recall I needed about $900k or so in my IRA/401k etc to cover me from 60-85 and this was with $20k SS included starting at age 62. Granted you have 13 years or so before you'd start to withdraw from those accounts I'd add more there and let them grow tax deferred.
Thanks! Glad my ramblings are good for something. And, hopefully the next 4 years and some-odd months will prove prosperous.

I just ran FireCalc, and to get me through the 60-85 age period, it said I need about 625,000 right now, to get a 95% chance of success. So, when you figure I have around $450K in the 401k/IRA, and $95K in the Roth right now, that's not too far off. And, if I keep making out my 401k and Roth over the next 4 years, that'll add roughly $84K into the 401k, and $22K into the Roth. So, I should be okay. Plus, with luck, there should be some of that age 51-60 money left over to play with.
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Old 01-09-2017, 07:53 AM   #32
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Keep maxing out the 401K. You can always get access to the money with a 72t disbursement.

You never know how much the 401K can grow to. I am surprised at the value of mine. It also teaches you to get by on less money now, even though you have it available.
Keep maxing the 401(k) out. Access the money penalty free and with lower tax burden now, squirreling more away...
How to Access Retirement Funds Early
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Old 01-13-2017, 05:53 AM   #33
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Keep maxing the 401(k) out. Access the money penalty free and with lower tax burden now, squirreling more away...
How to Access Retirement Funds Early

Hanks for posting that good blog post, which makes the case as well as it can be made that one should always max contributions to pre-tax accounts.
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