What is the right age for starting 72t distribution?

An important part of the assessment of 72t distributions as an income alternative is your age.

You can be too young or too old to benefit fully from this approach.

Am I too young for 72t distributions, under Rule 72t?

If you’re still in your early 40s or younger, you may be too young to derive real benefits from 72t distributions, under the Rule 72t.

There are two reasons why you may not benefit from Rule 72t early retirement distributions.

• One is simply that you may not have accumulated much money in an IRA. You haven’t had enough time to make many IRA contributions, and those contributions haven’t had a long time to compound.

• Secondly, the amount of the 72t distribution is calculated, using a 72t calculator, on the basis of your life expectancy, and if you’re around 40, for example, your life expectancy is more than four decades.

Do the math to decide if a 72t distribution is right for you

If your total IRA resources are limited, and if this sum has to be divided up over an extended life expectancy, you’re not going to be able to generate much current income using a 72(t) distribution. Moreover, you’re choosing an expensive way to generate cash—you’re using money that could otherwise be growing on a tax-deferred basis over the next several decades to provide for your retirement years.

Instead of taking advantage of Rule 72t and the 72t distributions, a home equity loan or other form of long-term credit might be a more effective solution.