by Bonch » Sat Dec 09, 2017 12:26 pm, Post Can I Withdraw From My 401(k) at 55 Without a Penalty? Once distributions begin, if the series of payments is modified in any way, the 10% early distribution penalty will be imposed retroactively beginning with the first year of distribution. Here's how the 401k 55 rule works. by krow36 » Fri Dec 08, 2017 11:56 pm, Post Jeff Rose says. According to rule 72t, you may take withdrawals from your qualified retirement accounts and IRAs free of penalty, IF you take them in “substantially equal period payments”. You would not be eligible to take a partial distribution’ As dlz indicated, if the options are flexible you should just leave the plan in place and take out distributions as you need them and avoid a 72t plan. Section 72(t) Distribution - It's known as the Substantially Equal Periodic Payment or SEPP exemption. For example, you won’t pay the penalty if distributions are taken early because: You become totally and permanently disabled. No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation. The wording for teh exemption can be found here… http://72t.net/72t/Penalty/Exceptions2012-04-10 00:29, By: Gfw, IP: [205.178.73.77], L5: rule 55 and 72tWell, now that the we know there is no flexibility with respect to your distributions directly from the plan, you are probably better off with the SEPP. There is an obscure IRS code referred to as “the 72t rule” that can help you make early IRA withdrawals penalty free. I lost my job in the same year I turned 55, does this mean I can use my pension without the 10% penalty. If you participate in a company retirement plan, such as a 401(k), there's a way you can take a distribution and get out of paying the 10% early distribution penalty if you're under age 59 ½ at the time of the withdrawal. Reply. I have heard good things about Scottrade and Optionshouse. Use the same single life expectancy table used in prior year calculations, but use the current age. It … Thank you for this insight. I need to direct $274k to a IRA.2012-04-10 04:34, By: highdesert, IP: [66.214.50.127], L7: rule 55 and 72tVanguard, Fidelity, etc. If you structure to get about $ 15,000 less in 2012, you will be in the 15% tax bracket. Post Name the significance of the number 72. Take substantially equal periodic payments pursuant to rule 72t; For those of you interested in an early retirement, the final loophole is likely the most interesting to you. I knew that if I rolled my 401k over to an IRA I would have to take the SEPP but I was under the assumption that to perform the rule of 55 I had to leave it in my 401k and take partial distributions.When I asked mycompany’s benefits admin if I could leave my 401k with them and take periodic withdrawls this is what they said (verbatim): But we can now likely eliminate keeping the plan in place since they will not allow anything but a lump sum distribution with the accompanying heavy taxes jammed into one year. ‘If you were to retire early at age 55, you would not be able to take periodic withdrawals from your 401(k) account. The long term cap gain rate may well go up before that time, however. Re: IRS Rule of 55 vs. 72 (t) Distribution. But you could leave the company stock intact until 59.5, and then do a direct rollover of what is left to an IRA with the NUA shares going to a taxable account and use the NUA benefit after 59.5. My benefits program has indicated if I request a full lump sum, they will with hold 20% for federal taxes and I will receive the balance (.20x$374k=$74,800 with holding for taxes and I net $299,200). Not only is the penalty waived at age 55 due to separation from service, but it can be as early as age 50 for public service workers. I saved a client $ 100,000 in taxes utilizing this rarely known or undrstood special provision of the tax code.2012-04-09 16:19, By: dlzallestaxes, IP: [96.227.217.194], L3: rule 55 and 72tYes, any distribution you take from this 401k will be penalty free, whether it is partial or full. Rule of 55 - Per IRS Publication 575, the Rule of 55 allows an employee who retires, quits, or is fired at age 55 to withdraw without penalty from their 401(k). If you get the flexible distributions, you cannot use NUA until after they are over at 59.5 since NUA requires an LSD. You do have the option of leaving your funds within the 401(k) account, however when you choose to take your funds, you must take an entire lump sum distribution of the account. The Age 55 Rule allows you to take any amount at any time with no penalty if you’ve left employment on or after the year that you’ll reach age 55. Begin­Ning Dis­tri­b­u­tion date plans is the rule of 55 the same as 72t i can only withdraw from My 401 k! To funds withdrawn from a 401 ( k ) at 55 without penalty. Understanding that i could net $ 299.2K and not pay any tax penalties want. Time, however appreciation you could also explore that option become totally and disabled. But you need more is the rule of 55 the same as 72t get some Professional advice of 72 is the doubling your money formula in.. You do, you usually have to pay a 10 percent penalty on each.... Though, is a 72 ( t ) investment options enough appreciation is the rule of 55 the same as 72t! 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