72(t) withdrawal

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L1: 72(t) withdrawalRecently retired from postal service on 31st Oct. Will turn 55 on Dec.3. Want to make monthly
withdrawal from 401(k) plan under 72(t) rule. Having a hard time filling out the TSP70 form
from lines 18 thru 23. Want to make this right to avoid any IRS penalty complications. Any advice
from experienced retired postal employees will be greatly appreciated. Thanks.2009-11-25 03:35, By: shaun, IP: []

L2: 72(t) withdrawalShaun,I believe the rules for 401k withdrawals (in your case, where you retired in the calendar year that you areturning 55) would allow you to take withdrawals without penalty, and do not require a SEPP type plan, and I also believe thatthere are no calculations needed as to how much you can take out each year. I may stand corrected. The problem is usually that the 401k plan does not offer the flexibility in terms of periodic withdrawals and the amounts and frequency that you might need. That is why some retirees choose to roll over 401k balances to IRAs and then start a SEPP plan, to avoid penalties on their “early” withdrawals. You need to check with 401k plan administrator to see what they allow in terms of withdrawals. I don’t think you need a SEPP type plan for that if what they allow meets your needs. Ken2009-11-25 04:52, By: Ken, IP: []

L3: 72(t) withdrawal
I agree with Ken’s comments. The law allows 401k plans to offer partial distributions but does not require them to do so. Many plans do offer partial distributions but some do not. If your plan does offer them, then great. You should be able to take any distribution amounts you need, whenever you need them. The plan is governed by the Summary Plan Document or SPD. If you have or can get a copy of the SPD for your plan, it will tell you if distributions can be taken at intervals or if they only offer a lump sum distribution. If only a lump sum distribution is available, then a SEPP plan may be what you need.

Also, do you know for sure whether or not you have a 401k plan? I would have thought that the USPO would have a 457 plan, which is similar to a 401k plan but for government employees. I believe that at one time, the rules for 401k and 457 plans were different. It’s possible that they have become closer to the same over the past few years, as there has been some interest in simplifying and unifying retirement plans of various types. Alan would know what, if any, differences still exist between these two types of retirement plans.2009-11-27 02:40, By: Ed_B, IP: []

L2: 72(t) withdrawalAs stated above since you turned 55 in the year you retired you can start taking withdrawals penalty free so don’t need to worry about the 72t rules. You can select any monthly amount you want withdrawn and can make changes to the monthly amount once each year. Would not suggest transfering to an IRA because you will then have to follow the 72t rules.2009-11-28 18:14, By: zinger, IP: []

L3: 72(t) withdrawal

Yes, he can do this *IF* his retirement plan allows it. Some do and some don’t. It is necessary to read the SPD to see which withdrawal rules his plan has implemented. Since this tends to be a rather tedious document, he should be able to get an explanation from his HR department as to what is allowed. Depending on what they say, he either needs a 72t plan or he doesn’t.2009-11-28 19:01, By: Ed_B, IP: []

L4: 72(t) withdrawalCorrect, I was responding to the originators question about the Governments TSP plan, which does allow penalty free withdrawals if you retired in the year you turn 55.2009-11-29 14:44, By: zinger, IP: []

L5: 72(t) withdrawalUnderstood. I was somewhat confused as to exactly what type of plan we were discussing in this thread. At one point it’s called a 401k plan, at another a form is referred to that sounds as if it is from a TSP. Added into all this is the thought that most government retirement plans are actually 457 plans.2009-11-29 17:11, By: Ed_B, IP: []

L6: 72(t) withdrawalThe TSP is a DC plan, and according to the following provisions copied from the IR Code Sec 7701 is to be treated as a 401k plan:>>>>>>>>>>>>j.) Tax treatment of Federal Thrift Savings Fund
(1) In general For purposes of this title – (A) the Thrift Savings Fund shall be treated as a trust described in section 401(a) which is exempt from taxation under section 501(a); (B) any contribution to, or distribution from, the Thrift Savings Fund shall be treated in the same manner as contributions to or distributions from such a trust; and (C) subject to section 401(k)(4)(B) and any dollar limitation on the application of section 402(e)(3), contributions to the Thrift Savings Fund shall not be treated as distributed or made available to an employee or Member nor as a contribution made to the Fund by an employee or Member merely because the employee or Member has, under the provisions of subchapter III of chapter 84 of title 5, United States Code, and section 8351 of such title 5, an election whether the contribution will be made to the Thrift Savings Fund or received by the employee or Member in cash. >>>>>>>>>>>>>>>>>>>>>>>>>The TSP does not actively support 72t plans, but some retirees are inclined to use the flexible installment options as a 72t plan after making the correct 72t calculations. Of course, this is only necessary when the employee separatesPRIOR to age 55.2009-11-29 19:20, By: Alan S., IP: []