72t question

You are here:
< Back

L1: 72t questionI am 56 years old and leaving my company. I have a $200k 401k and $300k pension. By taking my pension out as a lump sum by former company will also give me$1000 a month incomefor life. Does anyone know if do a 72t on my combined 401k of $200k and my pension of$300k, can I also receive the monthly income of $1000 without a penalty. Thanks2008-04-14 12:44, By: Ric, IP: []
L2: 72t questionHello Ric:
Yes, the pension of $1000 / month is unrelated to creating a SEPP plan based on your other deferred blances.
2008-04-14 18:20, By: TheBadger, IP: []

L2: 72t questionAsk the experts here, but if I”ve understood this concept correctly, at age 56 (55 or more) you would not have to setup a SEPP in order to avoid the 10% penalty. Of course you can, but you could also just setup regular draws. You may well have to transfer the funds into anIRA if the 401Kdoesn”t allow regular draws.
I would not have a SEPP if not necessary to avoid penalties. You just never know what the future may hold and you may need access to the funds well above your SEPP limits.2008-04-16 08:53, By: Larry, IP: []

L2: 72t questionUnder the “age 55 rule,”if you retire during the year you turn age 55 or older, withdrawals from yourqualified plansare not subject to the 10% penalty. However, the usual stopper is with thequalified plandesign. Most company plans do not allow systematic or periodic withdrawals from the plans but will only allow one withdrawal so you can do the IRA Rollover (OK plan) or stuff it under your mattress (poor plan). So before you set out on one course, check with your plan administrator to learn what you can do by leaving yourqualified plansin-place and making systematic withdrawals.
IF you process an IRA Rollover from the K-plan and pension plan, then you come under the IRA rules which impose the 10% pernalty on withdrawals before your actual age 59 1/2. For some reason people have the mistaken idea that if you do the IRA Rollover from a qualified plan at the company, the “age 55 rule” follows, and that is not correct. Where you money resides (qualified planor IRA) determines what the rules are.
My suggestion is to get with a financial planner who can help you build a plan for income distribution based on how much money you will need for living expenses and your life expectancy. Remember, by retiring at age 56 you could spend as much or more years in retirement than you spend earning and building your retirement funds. Also, with health costs rising more than the normal inflation rate, it gets more expensive to live after you retire than during your working years.
Jim2008-04-16 09:18, By: Jim, IP: []

L2: 72t questionI contacted my old boss and close friend who left a few years before me. I knew that he was over 55 and left his 401K there for several years. In fact it remained there until he was past 59-1/2. It seems that our former employer (A global oil Co.) did allow any periodic or even random withdrawals from the 401K. So there is the key. He also told me thatif he had transferred the funds to an IRA that he could not withdraw prior to 59-1/2 w/o the 10% penalty.
As I expected, you are 100% correct and I hope this may help clarify this for others who may be about to take this step. As you said, many of us will likely livelonger than we worked. The previous generation was expected to work until 65 and then fall dead at 70. Early retirement and living past 85 has brought us to a whole new game and it may not have the ending that we expect.2008-04-17 18:59, By: Larry, IP: []