401 k

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L1: 401 kI have read the posting about being able to use a 401k account for SEPP or 72t distribution, is that true?
I thought that if you are between age 55 and 591/2 and separated from work, you can withdraw any amount from your 401k without the 10% penalty, so why do a 72t on a 401k plan?
I thought I already have a grasp of this, apparently not.Thank you in advance for your comments.2011-02-24 22:16, By: wyzzy, IP: [24.43.7.188]

L2: 401 k>>I thought that if you are between age 55 and 591/2 and separated from >>work, you can withdraw any amount from your 401k without the 10% penalty If over age 55 at the time that you separated fromthe employer, then you are right as long as the employer and the plan allow for periodic distributions – some do and some don’t.2011-02-24 22:19, By: Gfw, IP: [24.148.10.164]

L3: 401 k>>If over age 55 at the time that you separated fromthe employer, then you are right as long as the employer and the plan allow for periodic distributions – some do and some don’t.

If I understand this correctly, the periodic distributions part is only for managing the tax bite being taken out of the distributions. You can take the entire 401(k) balance in a single distribution, still avoiding the 10% penalty, if you want, so long as you’re willing to accept the tax consequences of doing so. Correct?2011-02-24 23:47, By: knupug, IP: [216.218.240.46]

L4: 401 kYes, that is correct. But if they require a lump sum distribution, the marginal tax rate could be increased more than the 10% penalty they are avoiding.The amount of plan flexibility can vary, but the taxpayer can match the options up to their own situation. For example, if a plan requires a lump sum, but the taxpayer is only a year short of 59.5, the lump sum just needs to be large enough to cover a short period. But at 55, taking the lump sum would probably be a tax disaster.2011-02-25 17:33, By: Alan S., IP: [24.119.230.17]