72(t) Articles

Is 72(t) a Solution to a “Need” or “Want”?

72(t) investment solution

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Over 30+ years in business, we have helped many families get financially organized and make better investment decisions with their money. We have counseled individuals and families how to save money and accumulate wealth. I’ve been a big believer and teacher of wealth building and believe the only way to do this for most people is to systematically save money each month as an automatic deduction from their checking account and transfer the money to a separate savings and/or investment account. This “pay yourself first” mentality has been why most of our clients have accumulated substantial wealth over time.

This “pay yourself first” system is the exact reason so many people have accumulated significant wealth in their 401(k) and/or other retirement accounts (the equity in your home is a similar analogy since making monthly payments over 15 or 30 years plus appreciation also accumulates significant wealth). Contributing for many years to a 401(k) has allowed many people to accumulate what is the largest liquid sum of money they will have in their lifetime. I am also a big believer in dollar cost averaging, or adding money every 2 weeks or every month to your 401(k), which allows you to buy more shares when the price of shares is lower and buy fewer shares when the share price is higher. This is known as dollar cost averaging.

Many of our clients are under the age of 59½ and are looking to access their IRA/401(k)/TSP/403(b) pension/retirement funds without being assessed the 10% early distribution penalty. If this is something you want or need to do, you can achieve this by taking Substantially Equal Periodic Payments (SEPP) or 72(t) payments.

Keep in mind that there are many rules and considerations that must be taken into account.

I’ve always believed it pays to get advice. Once of my favorite sayings is, “Common sense is not that common.” Every day we hear about mistakes people have made that cost them thousands or tens of thousands of dollars that could have been avoided by getting proper advice from a competent financial professional. Often, people make financial decisions and then ask, “Did I make the right decision?”  We hope people will consult with us before they make a 72(t) early retirement decision because the costs and penalties for mistakes are significant.

I agree that there are some areas of personal finance that you can do yourself without the help of an advisor. For example, setting up a checking or savings account at a local bank or credit union is something anyone can do on their own. When it comes to investment planning, asset management, income planning, life and disability insurance, required minimum distribution strategies as well as hiring a 72(t) professional is a smart decision. Calling one of the 800 numbers at a well-known investment company and asking them to help you with 72(t) planning is a problem waiting to happen. Why? These companies are not in the advice business. They don’t and won’t advise on a 72t strategy; they only want you to invest money at their company.

Because we are affiliated with an independent broker-dealer operating under a fiduciary standard, we do not have any proprietary products to push or sell. We are truly an independent advisory firm and have many solutions (“risk-based” and “safe money options”) that we can offer to help our clients and prospects accomplish their stated goals and objectives.

Remember, it takes no skill to spend money; the hard part is to make it and save it. I have always believed that “you get what you pay for.”

If you would like to connect with our experienced team of specialists, please contact us today.

Stuart J. Spivak, LUTCF, RFC is Senior Partner at The Spivak Financial Group and Founder of 72(t) Professor.com. He can be reached at (888) 477-4825 or 72TSpecialist@spivakfinancial.com.

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