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Top 10 FAQ

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The standard age for taking money out of your 401(k) plan is age 59 ½. There are other situations where you can withdraw cash out of your 401(k) plan before the age of 59 ½ without paying a penalty.

Starting at age 59 ½, you can begin taking money out of your retirement account without penalty. Keep in mind that you will still have to pay any federal or state taxes that might be due. Under some circumstances, you may be able to avoid the penalty on early withdrawals.

There are many different investment options that we can discuss with you and there are 3 steps in this process. If we are managing the account and payments for you, there is no additional fee for us to work on this for you. This is not a do-it-yourself project for many reasons.

We cannot answer this question without having a conversation with you and obtaining a comprehensive understanding of your goals, objectives, financial picture, investment experience, and risk tolerance. The expected rate of return will depend on the investment choices that we deem fit for your retirement game plan once we have reviewed and understood your personal information, situation, and goals.

There are several ways you can bust a 72(t) distribution and the consequences can have a severe impact on your taxes if the account is not managed properly. If a fault occurs, the IRS will assess the penalty tax on your latest distribution and retroactively assess the tax on all distributions taken plus interest. This is why it’s so important to work with an experienced specialist when establishing a 72(t) distribution. Most investment advisory firms, as well as most accountants, attorneys, and bankers, are not very familiar with this strategy and many choose to avoid it altogether due to the complexities and potential implications.

You can open multiple retirement accounts and can choose to only apply the 72(t) distributions to just one of your retirement accounts, not all of them. This can most times be a complex process. We have a highly trained and experienced staff to assist and oversee that this is done in the proper manner. A mistake here could be very costly.

There are three tables that could be used to determine life expectancy. The most common table used is the Uniform Life Table. The maximum 72(t) interest rate allowed is the greater of 120% of the federal mid-term annual rates of the 2 months immediately preceding the month that you start the distributions. Please note this is not the interest rate to expect on the actual investment that the 72(t) IRA distribution is coming from.

Great news! Effective January 2022, the IRS now allows for a rate of up to 5%.

The answer is yes. By taking income through a 72(t), you are not avoiding income tax, but you are avoiding the 10% early withdrawal penalty.

You might be able to use your IRA assets for a short period of time using a 60-day rollover. However, you must follow the rules carefully to avoid paying a penalty.

Absolutely! You can start the stream of income with no penalties or hassle with the IRS, assuming you structure the distribution properly.

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Would you like a personalized estimate of the amount of penalty-free income your 401(k), TSP, 403(b), 457 plan or IRA can generate using the IRS Rule 72(t)?

Simply provide us some basic information by clicking the button below and one of our 72(t) Specialists will contact you to provide a personalized estimate for your review.

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