Any consideration that the10% penalty will be waived due to economic situation
L1: Any consideration that the10% penalty will be waived due to economic situation
I am curious if congress would consider waiving the 10% early withdrawal penalty for those younger than 59 1/2 due to the staggering unemployment rate and current economic conditions. I have been on a SEPP plan since early 2010 at age 52and find that I
am going to need to withdrawal much more from my IRA over the next 6 years in order to pay my bills. I am making qualified withdrawals now and I avoid the 10% penalty, but the annual total falls far short of what I need to live. Since I and many people cannot
find a job, I would hope congress would consider dropping the early withdrawal penalty since the use of the funds would need to be used to pay bills.
2011-09-11 01:36, By: HabManFan, IP: [184.108.40.206]
L2: Any consideration that the10% penalty will be waived due to economic situation
There are some supplemental waiver provisions to allow additional withdrawals for medical expanses, and helath insurance premiums for those who are unemployed. Check the list of penalty exceptions to see if you qualify for these additional withdrawals not
subject to the 10% penalty.
2011-09-11 05:10, By: dlzallestaxes, IP: [220.127.116.11]
L3: Any consideration that the10% penalty will be waived due to economic situation
I would not expect any “additional” across the board penalty relief from Congress unless the situation gets much worse, probably worse than in 2008 since there was no across the board penalty relief passed in 2008 either.
That said, you are so close to the start of your plan, that busting it will obviously cost much less than if you bust it later. Trying to hold the plan together at all cost is worth it after several years in the plan or if you
are within a year or two of your modification date, but those conditions are not present in your case.
If you bust the plan now, you can still reduce the penalty owed by applying the other exceptions that you qualify for on Form 5329. You could amend your 2010 return to change the 5329 for that year, but you would still probably
owe some penalty.
One option for the future if you bust the current plan is to then partition the IRA into two IRA accounts, one for a new SEPP thatcover SOME of your expensesand the other for penalized distributions except for other non SEPP
penalty exceptions you qualify for. The SEPP would provide you with penalty free distributions up the amount distributed, and the extra amounts provided from the non SEPP account would be penalized unless a different exception could be applied. This type of
plan therefore still shield some of your IRA money from the penalty, and it might get you through to age 59.5 if set up correctly and the non SEPP account does not go dry before you hit 59.5.
2011-09-11 19:20, By: Alan S., IP: [18.104.22.168]