ER date set to avoid 72t

[nun]

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).

 

[Brett_Cameron]

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

 

[Sparty]

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.

 

[Brett_Cameron]

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.

 

[teejayevans]

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

 

[eytonxav]

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.

 

[pimpmyretirement]

What's so bad about doing a 72t?

 

[Brett_Cameron]

What's so bad about doing a 72t?

Nothing bad about it except a little loss of flexibility.

 

[nun]

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.

 

[skyvue]

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!

 

[pimpmyretirement]

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.

 

[CyclingInvestor]

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.

 

[Ronstar]

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.

 

[teejayevans]

BTW, the rate which you use to calculate 72t withdrawals has been dropping, might want to recalculate if you haven't lately.
TJ

 

[cinman2000]

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

 

[foxfirev5]

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.

 

[cinman2000]

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?

 

[foxfirev5]

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.

 

[cinman2000]

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.