A:

The exact amount of the 72(t) distributions that you are eligible to take will be determined by your age and the IRS published interest rate for the month the calculation is done. Generally, a plan participant who is separated from service (no longer employed by the employer that sponsored the plan in question) and is under age 59.5, is permitted to take 72(t) distributions from the plan. Consult with your plan administrator regarding the services it provides for 72(t) distributions.

Here are some points to consider:

The duration of the 72(t) distribution: is your financial need short term or long term?
72(t) distributions must continue for five years or until you reach the age of 59.5 (whichever is the longer period). For example, if you are age 40, you will need to continue these distributions for 19 years. If you are age 58, you will need to continue distributions for five years.

Will you need this amount each year?
Once you begin a 72(t) distribution using the annuitization or amortization method, you are required to distribute the calculated amount each year - no more, no less. Taking a 72(t) distribution from your retirement is a very important financial decision. Be sure to consult with a competent tax professional to ensure that all your options are considered and that you choose the option best suited to your particular financial profile.

(To read more, see The 401(k) And Qualified Plans Tutorial.)

This question was answered by Denise Appleby
(Contact Denise)

Hot Definitions
  1. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  2. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  3. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  4. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  5. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
  6. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
Trading Center