72t penalty or bust as posted by Aaron on 11/2/200

L1: 72t penalty or bust as posted by Aaron on 11/2/200The questioned supposed that the SEEP was set up at 58 years of age and busted at 61. It was indicated that the 10 per cent penaty would be applied to that portion withdrawn before 59 1/2. I understand that and knew that was the case. My question is what happens at age 61 when you go bust. You pay the penalty on the portion withdrawn before 59 1/2 and now what? Do we start over or is that the end of it and all suseqent withdrawals are not suject to 10 per cent penalties.2008-01-15 11:38, By: sem, IP: [74.237.252.117]
L2: 72t penalty or bust as posted by Aaron on 11/2/200I believe that once you bust a plan, you pay the penalty on all distributions to date. Then the plan ceases to exist. If you are under 59 1/2, then you can set up a new plan, starting a new 5-year period. If you are over 59 1/2, there is no need to set up a new SEPP 72-T plan because you have complete flexibility as to the amounts of distributions, from -0- to 100% of your IRA balance.
You have the same result you would have had if you never set up the initial SEPP 72-T plan, and merely paid the 10% penalty on each year”s distributions until reaching 59 1/2.2008-01-15 13:26, By: dlzallestaxes, IP: [151.197.162.171]

L2: 72t penalty or bust as posted by Aaron on 11/2/200Except for the interest penalty.
While no penalty will apply to post age 59.5 distributions, if you bust a plan at age 62, you now have perhaps 4 years of interest rate penalty back to the due date of the first 72t year.
This means that starting a plan close to age 59.5 carries a relatively lower excise tax penalty for busting it, but the interest due is a larger portion of the total bill.2008-01-15 16:36, By: Alan S., IP: [24.116.165.60]