Who Should Consider 72(t)
WHO SHOULD CONSIDER 72(t)
Are you in a situation where you want (or need) to take early income from your Retirement Savings Account(s)?
If you are accepting early retirement or experienced the loss of a job and require an immediate income stream, utilizing IRS Rule 72(t) may provide you a solution to this problem.
Keep in mind, if you separate from service in the calendar year in which you turn age 55, you may be able to take distributions from your 401(k) or other qualified plan (other than an IRA) and avoid the 10% early withdrawal penalty tax. Distributions made from a qualified governmental defined benefit plan, if you were a qualified public safety employee (state or local government) who separated from service on or after you reached age 50, can also avoid the 10% early withdrawal penalty tax. Remember, you will still be subject to ordinary income taxes on withdrawals.
We have effectively set up 72(t) distributions for income withdrawals prior to age 59 ½ MANY TIMES throughout almost 50 years and this strategy works perfectly, IF DONE CORRECTLY! Many companies and many Advisors simply do not know how to properly structure a 72(t). Make sure you work with a Firm who is experienced and knowledgeable in this specialized area.
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