72t early withdrawal for home purchase
L1: 72t early withdrawal for home purchaseIs there a penalty for early withdrawal to purchase a home. Last year my broker told me that I could withdraw up to $10,000 to buy a home without incurring any penalties (I would have to pay the tax of course). I already have a annual distribution on a 72t. Now he tells me he will have to look into it.2009-03-06 23:51, By: Doug, IP: [220.127.116.11]
L2: 72t early withdrawal for home purchaseThere is no early withdrawal penalty if your distribution meets the requirements of a qualified first home distribution. However, if you only IRA account is currently being used for a 72t plan, you cannot take out MORE than your annual distribution or your 72t plan is busted.
If you have another IRA account that is NOT part of the 72t plan, you could take the distribution from that account penalty free. However, if you buy the home, you may also incur additional expenses for the mortgage payments, taxes etc that would also require greater IRA distributions than your plan allows. You need to review your new estimated living expenses to see what effect this will have on your 72t plan. Consider that if you can itemize deductions as a homeowner, your income tax bill should be less than before, but perhaps not low enough to allow you to live on the same 72t distribution.
A real estate agent probably has no clue how this would affect your current plan, so be careful here. Also, check into the current stimulus benefit for new homeowners to see if you qualify for that, which is a tax credit up to $8,000. It is going to take some careful analysis with this many variables to consider.
If you have to bust your 72t plan, the 10% penalty will be due on all your distributions since the plan began plus interest on the prior years. Only the 10,000 for the new home costs would escape the penalty if you qualify, and that is not a good tradeoff.
2009-03-07 04:52, By: Alan S., IP: [18.104.22.168]
L3: 72t early withdrawal for home purchase>A real estate agent probably has no clue how this would
>affect your current plan, so be careful here.
Exactly so. I would be stunned if any real estate agents have spent the time necessary to become familiar with the 72t rules. In fact, a lot of professional financial advisors have not specialized in this area either. Before accepting advice in this area, it would be good to find out whether or not your financial advisor was well versed in retirement issues in general and 72t in particular.
2009-03-08 03:47, By: Ed_B, IP: [22.214.171.124]