I do not want to totally get out of my retirement 401(k), but I want to take 72(t) distributions. What should I consider?

By Denise Appleby AAA
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)

RELATED FAQS

  1. Where can I find out about upcoming stock splits?

    Learn what a stock split is, how it is accounted for and where to find upcoming information about stock splits on the Internet.
  2. Does the buyer or the seller control a call option?

    Buy call options and maintain control over the price you pay and when to buy a given stock. Learn how to maintain control ...
  3. How do I invest or trade market indicators?

    Read about how investors can trade actual market indicators, such as the S&P 500 Index, rather than specific stocks or commodities.
  4. What are some ways to reduce downside risk when holding a long position?

    Learn about the various methods a trader can use to minimize risk of loss or protect a portion of profits in an existing ...
RELATED TERMS
  1. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  2. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
  3. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  4. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  5. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  6. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    How do I invest or trade market indicators?

  2. Professionals

    Who Wants to be a 401(k) Millionaire?

  3. Professionals

    Are Longevity Annuities in 401(k)s a ...

  4. Trading Strategies

    Top Day Trading Instruments

  5. Options & Futures

    Give Yourself More Options With Real ...

Trading Center