L1: 72TI am 55 and want to retire early. I have about 460,000 in a 401K. Can I take the 460,000 and set up 4 seperate IRA accounts and then use 72T with just one of the IRA Accounts and let the others build up for the future.
If so will this avoid the 10% penalty?2009-11-25 01:39, By: SteveD450, IP: [184.108.40.206]
L2: 72TIf the SEPP is valid, distributions from the SEPP will avoid the 10% penalty tax.Question… Why would you need 4 IRA accounts? You really only need two accounts… one for the SEPP and the other account for the non-SEPP funds.You may just be making your life a lot more complicated that it needs to be.Most brokerage accounts will allow you toinvest in in about what ever you want.2009-11-25 20:40, By: Gfw, IP: [220.127.116.11]
L3: 72TSteve,Since you are 55, remember that if your 401k plan offers flexible distributions, you can avoid a 72t plan by simply taking distributions directly from the plan. When you reach 59.5, you can then transfer the plan to an IRA.So check with the SPD or plan administrator to see what withdrawal options they offer, and how many time you can change withdrawals. As long as the plan would allow you a distribution at least once a year, you would be further ahead eliminating your penalty by taking direct distributions from the plan. Once the plan balance is rolled over to an IRA, the age 55 penalty exception is lost. Then you would probably need a 72t plan.You should also check into NUA potential if you have highly appreciated employer stock in the plan. In that case, you would probably leave the stock in the plan when you took your penalty free distributions and then when you hit 59.5 it becomes a new triggering event and you could then do a lump sum distribution and take the employer stock into a taxable account to get access to the LT cap gain rates when you sell.2009-11-25 22:27, By: Alan S., IP: [18.104.22.168]
I am in substantial agreement with these comments, although there could be other considerations. If your 401k plan is loaded with low performing funds, has minimal choices, or has high fees, it may be a better choice to roll the 401k balance into an IRA and start a SEPP. The investment choices available in an IRA are vast. By shopping for low fees, you can find funds with decent performance at low cost. I use Vanguard as my SEPP custodian and am quite satisfied with them.
Thanks in LARGE part to the fine folks on this web site, I did not find setting up a SEPP all that onerous. I used other info as well but this site provided much of what I needed. Everything that I wanted a SEPP to do, it has… and I have had very few problems with it or with my custodian. Overall, I would say that my SEPP experience was quite positive and I do not regret using the 72t exception one bit.2009-11-27 02:07, By: Ed_B, IP: [22.214.171.124]