am I too young to start my 72t

L1: am I too young to start my 72tI have worked for my employer for 20 years and have always maxed out my 401K contributions. I also have
and investment property that brings in an income of $8k annually. I am now being down-sized and will be
without a job at age 53. I have 235k in my 401k, and additional 80k in a Roth and a bank savings account.
I am considering the option of taking advantage of a 72t at this time in my life, does anyone see where I
could run into problems doing this?2007-06-22 15:34, By: bill, IP: [69.47.232.10]

L2: am I too young to start my 72tYours is the typical reason for a 72t, and I imagine 6.5 years for the plan duration is around the average term for these plans. I would avoid setting up the plan for a few months until you are sure that other job prospects will not be forthcoming. An obvious problem is that if you continue your plan after replacing the job, you are increasing your tax bracket and losing tax deferral on retirement accounts unnecessarily.
You might use your savings account for 4 or 5 months for expenses if you are not getting any severance. If you then start your plan in Nov or Dec, you have the option of taking out the pro rated annual amount or the full annual amount for 2007. You can”t elect something in between, and if you took out the full annual, then you might be increasing your tax load for 2007. But the 5 months gives you a chance to avoid the plan if you get another job, without eliminating your chance to get the full year amount if you need it come December.
After you transfer the 401k to a TIRA, you will also have the option of including your Roth IRA balance in the 72t if you wish. This would increase the amount you could draw and it gives you the choice to draw it from the account you wish based on tax considerations. The Roth distributions would probably not be taxable for quite awhile because your contributions and conversions come out tax free including conversions done within 5 years. The 72t will waive the 10% penalty on ROth conversions under 5 years as well as the TIRA distributions.
You probably don”t have enough savings to permanently retire unless you expect an inheritance or have some other income coming in, so you will eventually want to get another position. Another option is to sell the investment property if that will work for you. It would definitely provide funds to delay or eliminate the need for the 72t.
If you get another position, it may be with a company who has a 401k that will accept transfers. If you were to transfer your current plan to the new employer and then not separate from the new employer at least until age 55, you can then access those 401k funds without penalty due to the age 55 separation exception. As you can see, you have access to several strategies that could be viable.

2007-06-22 20:48, By: Alan S., IP: [24.116.66.98]

L2: am I too young to start my 72tHi, Bill:
Sorry to hear about your down-sizing. Everyone reacts a little differently to that so it is hard to know if you are due congratulations or commisserations.
That said, having $300k in your retirement plan at your age is great but I would question whether or not it is sufficient for afull-timeretirement that could last another 30 or more years. If this money were invested in a well diversified portfolio of low cost mutual funds, it could probably sustain about a 5-6% withdrawal rate, say 5.5% on average, for about $16.5k per year in annual withdrawals. For this to occur, the market would have to work in your favor and not go through any serious recessions for a while. Since the markets tend to average around 10-11% return over very long periods, your account should grow in spite of your withdrawals.
A serious problem, of course, is that over shorter time periods, the market can have significant declines. A deep recession can have a very serious and deleterious impact upon your retirement plans. One way to cope with this is to have 10% or so of yourmoney in a good money market fund. While this can reduce your overall portfolio performance, it also allows you to take distrubutions from the money market fund and not sell any stock or bond fund shares during times of poor market performance when share prices are likely to be depressed.
As Alan suggested, it might be good at this point to look for another job for the next few years. This not only builds your retirement stash but reduces the number of years you are likely to need to fund and gets you closer to age 59.5 when you can take IRA distributions without needing a 72t plan or paying the 10% early withdrawal penalty tax.If the job market is not so good, then consider taking a part-time job of some sort that will allow you to supplement the income that a 72t plan can deliver from your current retirement savings.
Ed2007-06-24 15:01, By: Ed_B, IP: [67.170.159.37]

L2: am I too young to start my 72tGood morning Bill:
As to the question of you retiring now, with the assets you have the answer is quite simple … you don”t have enough and you should plan on working until age 65 or so.
When you find another job, you should plan to accumulate at a higher rate than you have been doing to this point. I know that concept becomes a financial challenge sometimes, but dig deep and make the commitment to do it. The Roth IRA is a great vehicle besides the K-plan, but also look tonon-tax advantagedmutual funds and tax deferred variable annuities to boost your assets for retirement. If the thought of owning your own business appeals to you, read the book “The E-Myth” by Michael Gerber first. Then you will be better prepared for this option.
Average rates of return look good. However, “sequence of returns” is the most important concept. If the market is going up when you begin making withdrawals, that is good. But if the market is going down when you begin your withdrawals, that is bad and can be disasterous.
Good luck.
Jim2007-06-25 06:51, By: Jim, IP: [24.252.195.14]