72t Rules

April 24th, 2010

Question: 401k 72(t) early distributions questions?

I know this is a complicated subject, but help from knowledgeable people would be appreciated.

1. Say I set up the proper 72t Distributions and at age 59.5, there was still a lot of money in the account. Is this money handled normally from then on out (i.e. the normal withdrawal rules associated with the 401k as if I never did 72t Distributions)?

2. If I am in the middle of a 72t distribution plan, could I still withdrawal more funds (subject to the taxes + 10% penalty on the withdrawn money of course)?

3. If I’m in the middle of a 72t distribution plan, and I get a new job with a 401k plan, could I contribute to that plan as normal?

Thanks.
I’m referring to the IRS guidelines, not to arbitrary things found in a given 401k plan. Please answer the questions with regards to the IRS guidelines assuming that the 401k plan itself will not pose further complications.

Answer: 1. Yes, as long as you have received the payments for a minimum of five years. You can discontinue the periodic payment schedule and proceed normally.

2. Yes, anyone over age 59.5 who takes a 401k distribution is not subject to the 10% penalty.

3. Yes, there is no upper age limit set by the IRS for 401k contributions.

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