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)

  1. I stopped distributions from my retirement account while under Rule 72(t). Will this ...

    If an individual modifies a substantially equal periodic payment (SEPP), including discontinuing the SEPP before the end ... Read Answer >>
Related Articles
  1. Financial Advisor

    Tough Times: Should You Dip Into Your Qualified Plan?

    401(k)s, pensions and profit-sharing plans can be a source of cash, but there are consequences to this option.
  2. Retirement

    Tips For Moving Retirement Plan Assets

    Moving assets is common when changing jobs or retiring, but you have to do this carefully to avoid penalties.
  3. Retirement

    The Basics Of A 401(k) Retirement Plan

    This plan has become one of the most popular retirement options. Find out why.
  4. Financial Advisor

    Multiple Accounts? Here's How to Calculate RMDs

    Ever wondered about how to calculate required minimum distributions on multiple accounts? Here's a quick primer.
  5. Taxes

    How 401(k) Withdrawals Work When You're Unemployed

    Unemployed individuals can pursue several options when taking money out of their 401(k), but they should carefully weigh taxes and possible penalties
  6. Financial Advisor

    What Baby Boomers Need to Know About IRA RMDs

    Mandatory minimum distributions from traditional IRAs and qualified plans cannot be avoided. But there are several ways to minimize their impact.
  1. Rule 72(t)

    An Internal Revenue Service (IRS) rule that allows for penalty-free ...
  2. Required Minimum Distribution Method

    One of three methods by which early retirees of any age can access ...
  3. Fixed Annuitization Method

    One of three methods by which early retirees of any age can access ...
  4. Distribution

    1. When trading volume is higher than that of the previous day ...
  5. Mandatory Distribution

    The amount an individual must withdraw from certain types of ...
  6. Eligible Rollover Distribution

    A distribution from an IRA, qualified plan, 403(b) plan or 457 ...
Hot Definitions
  1. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  2. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  3. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  4. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  5. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  6. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
Trading Center