72(t) Articles

72(t) Experience, Knowledge, and Wisdom Matters

Speak with a professional before initiating a 72(t) exception

Executing an early retirement 72(t) exception correctly will provide a stream of penalty-free income. Nevertheless, if it is done incorrectly, you could end up with severe consequences, including ending up broke! Also, the IRS may assess the 10% penalty on all amounts withdrawn if your IRA runs out of money before the end of the 72(t) SEPP commitment period. There are strict rules that need to be followed. Therefore, it is imperative that you work with a company and an advisory team that has experience with the entire process. We don’t believe that CD’s (certificate of deposit) can be used as effectively as an investment option for a 72(t) SEPP plan.

Not all financial advisors, online brokers, robo-advisors, CPAs, or tax attorneys know much about this little-known, often used 72(t) IRS rule. Moreover, NOT ALL companies know how to properly structure a 72(t) SEPP, how to set it up correctly, or even have the mechanical or electronic means available to do such distributions! Finally, make sure you confirm that your IRA custodian is 72(t)-friendly and will code your distributions properly so that you can stay off the IRS mailing list.

Very few no-fee, no-risk fixed annuities will work (but some may) because most fixed and indexed annuities do not allow withdrawals during the first year of the contract. We can provide you examples of the few that will work effectively.

Other commonly used vehicles for a 72(t) SEPP are managed accounts (with stocks/bonds/mutual funds/ETF’s) or variable annuities. People oftentimes prefer variable annuities, which allow you to actively invest your money (in 100+ investment choices), so it can potentially grow while at the same time offering diversification AND protection, all while you are receiving an income stream.

Again, most companies and/or advisors simply do not know how to properly structure a 72(t) SEPP. Work with someone who is experienced and knowledgeable in this specialized area of financial planning.

Just ask and we can help guide your choices.

A quick phone call will help you determine if this is right for you