72(t) Articles

Who Qualifies for a 72(t)?

The 72(t) is a great way to access your retirement funds early without incurring the 10% penalty that usually applies to early withdrawals. But who actually qualifies for this special exception? In this blog post, we’ll explore the requirements and eligibility criteria for taking advantage of the 72(t).

What is a 72(t)?

A 72(t) is an early withdrawal from a qualified retirement plan or IRA that allows you to avoid the 10% penalty that usually applies to such withdrawals. This special exception was created by the IRS in order to help individuals access their retirement funds before they reach retirement age without incurring a hefty penalty. The “72(t)” refers to Section 72(t) of the Internal Revenue Code, which outlines the rules and regulations surrounding these types of withdrawals.

Eligibility Requirements

In order to qualify for a 72(t), you must meet certain eligibility requirements. These include:
• You must be under 59 ½ years old
• You must take substantially equal periodic payments (SEPPs) until age 59 ½ or five years, whichever is longer
• Your SEPPs cannot be modified or stopped once they are set up
• You cannot contribute any additional money into your account while taking SEPPs

Tax Implications of a 72(t)

It’s important to note that while taking advantage of the 72(t) can help you avoid the 10% penalty on early withdrawals, it does not exempt you from paying taxes on those withdrawals. Any money withdrawn through a 72(t) will still be subject to ordinary income tax rates. Additionally, if you fail to adhere to any of the eligibility requirements outlined above, you may be subject to both penalties and taxes on your withdrawal amount.


The 72(t) can be an invaluable tool for accessing your retirement funds early without incurring hefty penalties. However, it’s important that you understand all of the eligibility requirements and tax implications before taking advantage of this special exception. If done correctly, it can provide much-needed financial relief during difficult times without having to worry about hefty penalties or taxes down the road.

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