Early Withdrawal

Archive for October, 2006

Understanding the 72(t) Substantially Equal Payments Framework

Rule 72t is about the IRC Section 72t allowing IRA Early Withdrawal of substantially equal periodic payments. This systematic Ira Early Withdrawl allowed by Section 72t of the Internal Revenue Code is referred to as 72t or 72t Distributions.

Rule 72t is about substantially equal payments

As previously mentioned, a 72t Early Retirement is about taking many 72t Distributions of substantially equal payments. A 72t Early Retirement distribution must be structured properly in order to avoid the premature IRA early distribution penalty tax. A 72t Early Withdrawal is more complicated than a normal IRA Early Withdrawal or a 401k Early Withdrawal so be careful when enrolled into a 72t distribution schedule.

The following questions and answers offer a brief overview of the 72 t rules:

Who is eligible to take 72t Distributions, under the Rule 72t?

Rule 72t permits any IRA owner can take 72t Distributions at any time, for any reason.

However, the point of this 72t Early Retirement distribution strategy is to avoid having to pay a 10% premature IRA early distribution penalty, so it is only useful to those under the age of 59�.

Remember, if you are already 59� the Rule 72t and 72t distribution do not apply to you.

When can I take a 72t distribution from my IRA, under the Rule 72t?

Rule 72t allows you to begin at any age under 59�.

However, you must set up a schedule of substantially equal payments that is satisfied annually to avoid violations of Rule 72t. If you violate Rule 72t, you will be faced with taxes and penalties of IRA early withdrawals.

Click here to continue with the rest of this overview.

Question: at what age can i withdraw money from the IRA without penalty fee?

Answer: 59.5 but there are exceptions like substantially equal payments until you are 59.5 or 5 years which ever is longest.

Celtic vs rangers Mcgeady’s penalty

Question: INVESTING AND RETIREMENT QUESTION! 10 pts! ?

The deductibility of contributions to a traditional IRA can be limited by:

a. age or adjusted gross income (AGI).
b. whether or not a person has earned income.
c. whether or not a spouse is covered by a retirement plan
at work.
d. All of the above factors can limit the deductibility of
contributions to a traditional IRA.

If a contribution to a traditional IRA is not deductible:

a. there is no point in making the contribution because it will
not save any tax.
b. the contribution must be used for higher education expenses
if it is withdrawn before age 591h.
c. the income from the contribution will be compounded tax
deferred until the money is withdrawn.
d. it should be converted immediately to a Roth IRA.

Answer: 1. D
2. C