Cost of 72T

L1: Cost of 72TI just retired August 31 at the age of 55. I’m going to rollover my 401K and setup a 72T.What expense will I occur from my financial guy to set this up and what should the annual cost be? The 401K is worth about $450,000.2005-09-15 23:20, By: Just Jim, IP: [205.188.117.9]
L2: Cost of 72TWHY ARE YOU GOING TO ROLLOVER YOUR 401-K TO AN IRA ?????
Since you are 55, retired, and “separated from service”, you can make withdrawals from your 401-k without the 10% penalty anyway. Further, you won’t have to worry about the problems related to “busting” a SEPP 72-T plan, which must run for the longer of 59 1/2 or 5 years (which is your case).
The only benefit to rolling over a 401-k to an IRA is the ability to invest in specific securities rather than the mutual funds limited by your employer.
In your case, you could probably split your retirement accounts by keeping enough in your 401-k to cover your needs until you are 59 1/2. Rollover the rest to a SELF-DIRECTED IRA, where you can select your own investments. ( I suggest a significant portion be in fixed interestinvestments paying 5-7% because ultimately all withdrawals from retirement accounts are taxedat ordinary income tax rates,even capital gains. Stock/mutual fund investments should be made in non-retirement accounts if you have investable funds outside your retirement accounts.)
ENJOY YOUR RETIREMENT !!!!!2005-09-16 07:46, By: dlztaxes, IP: [4.175.9.86]

L2: Cost of 72TIf retired at 55 and “separated from service” allows the withdrawal of funds with no 10% penalty then what is the need for a 72T? It has been my understanding that any withdrawal prior to 59.5 was subject to the penalty unless a 72T was set-up.2005-09-16 11:20, By: Just Jim, IP: [152.163.100.202]

L2: Cost of 72THello Just Jim:
There are two sets of rules in-play for you. If you retire during the year your attain age 55, then money can be taken from your qualified plan, ie 401(k), without the 10% penalty. Since you retired August 31, 2005, and you will be age 55 at least by 12-31-2005, then you satisfy the requirements for penalty-free withdrawals from your K-plan. No 72(t) is necessary.
Withdrawals from IRA’s before actual age 59 1/2 carry the 10% early withdrawal penalty unless some exception applies. In this case your are talking about using 72(t) as the exception to the 10% penalty.
Suggest that you and your financial advisor work up a plan to leave assets in your K-plan and use that for withdrawals and plan to exhaust it by the time your reach age 59 1/2. The other part of your plan is to do an IRA Rollover and invest for growth. Some of your investments will probably include some “fixed” and other elements will include “growth-type” investments. It’s impossible to determine what your final investment mix will be from the sketchy information your have provided. And please don’t start listing it and explaining your finances since that’s for you and your financial advisor to work out. Just remember that you have a whole world of options available to your in the IRA environment so don’t eliminate any possibility until you and your advisor determine something “unsuitable” for your situation.
A big part of your planning should be the “stretch IRA” concept for your family when you do kick off. Have your advisor explain this aspect of the IRA Rollover. It isn’t available for assets left with the K-plan, in most instances, and it’s quite valuable.
Hope this helps.
Jim2005-09-16 11:33, By: Jim, IP: [70.184.1.35]

L2: Cost of 72TIf your “financial guy” didn’t explain these rules to you, like Jim and I did, or if he didn’t know them, CHANGE FINANCIAL ADVISOR OR TAX ADVISOR !!!
This is BASIC information.2005-09-16 12:15, By: dlztaxes, IP: [4.175.9.236]

L2: Cost of 72THave some IRS rules changed to allow withdrawal offunds from my 401K prior to age 59.5 with no 10% penalty? My ability to retire at 55 was based on the pension from my employer and the added income from a 72T. If funds can be accessed penalty free prior to 59.5 without a 72T it appears I don’t need a 72T. My financial adviser should know this as has been stated.He isn’t the only one mentioning a 72T.Is age a factor in this?I will be 56 next month.2005-09-16 15:55, By: Just Jim, IP: [64.12.116.202]

L2: Cost of 72TMost un-informed accountants, tax, and financial advisors confuse the fact that IRAs require 59 1/2 to avoid penalty (which is the usual source of SEPP 72-T programs), vs. the 401-K rules (which permit penalty-free withdrawals as of the beginning of the year in which you become 55, as long as you are retired AND separated from service with the employer). You can start taking distributions now, but might want to wait until January, if you can, when you might be in a lower tax bracket. For 2005 you would be adding the 401-K income to your wages, including any severance or final payments or bonuses.2005-09-16 16:19, By: dlztaxes, IP: [4.175.9.95]

L2: Cost of 72TThanks for the enlightening information on accessing my 401k money without a penalty or setting up a 72T. Can my 401K funds be transfered to another custodian and still remain a 401K or must they be rolled over into an IRA? My financial adviser seemed too anxious to rollover my 401K to set-up a 72T. Must have been some financial gain on his part.2005-09-16 19:53, By: Just Jim, IP: [152.163.100.202]

L2: Cost of 72TTo take advantage of the 401(k) rules, the funds need to stay in a 401(k) – talk to your Plan Administrator and see if they allow funds to stay on deposit after termination of employment. If yes, then also ask if they will allow periodic withdrawals.
However, if you rollover/transfer to an ITA, then you are subject to the IRA rules.
2005-09-16 21:16, By: Gfw, IP: [172.16.1.72]

L2: Cost of 72TMy financial adviser seemed too anxious to rollover my 401K to set-up a 72T. Must have been some financial gain on his part.
No kidding.
Jim2005-09-18 18:13, By: Jim, IP: [70.184.1.35]