Any reason not to 72T?
L1: Any reason not to 72T?My spouse and I work for the same employer, and we each have the following:
We each have COLA’ed pensions as well. However, our current plan is to leave work next year – about 4 years before we’re eligible to draw the pensions.
With frugal living, the 457b funds will span the gap and won’t incur early withdrawal penalties. However, when the pensions kick in, our income will more than double – putting us in a much higher tax bracket.
With the above scenario, I’m hard-pressed to think of a reason not to roll over 100% of the 401k and 401a funds, and take the maximum 72t as soon as we can – even though we won’t really need the funds at the time. Reason being, whatever 72t withdrawals we take out prior to the pensions, would be at a significantly lower tax rate. Such funds would be put into low risk taxable accounts, but future taxes would only be on the interest earned.
The only other concern I’ve seen mentioned, is asset protection – but there seems to be little or no difference between IRA and 401k/401a protections in the state we’ll be living in (WA).
Any holes in the above logic?2009-10-19 16:42, By: syspig, IP: [220.127.116.11]
L2: Any reason not to 72T?What ages would you be at separation? This impacts early withdrawal penalties as well as the length of the 72t plans. What flexibility exists with withdrawals from the 401k and 457 plans? I assume this is a government 457?2009-10-19 18:18, By: Alan S., IP: [18.104.22.168]
L3: Any reason not to 72T?Also, check with you employer’s pension plan administrator to see if there is any NUA ( Net Unrealized Appreciation Employer Stock) in your plan(s). If so, then get J K Lasser “YOUR INCOME TAX” to read the 2 pages about NUA, and the tremendous tax savings if you qualify, and the correct procedures to follow.2009-10-19 19:27, By: dlzallestaxes, IP: [22.214.171.124]
L3: Any reason not to 72T?Age at separation for both of us would be 50 1/2, give or take a few months.
457 withdrawals from my understanding, have no penalties once we’re separated from our employer – just income tax. Our plans essentially drain all of the 457 funds over 3.5 years, while waiting on the pensions. Part-time work might take place during this time, if that has any effect on the decision or withdrawal strategies.
As far as i know, the 401k’s and 401a’s have no early withdrawal options that are penalty free for us, other than IRA rollover/72t.
Yes – government 457’s.
Thanks much for any info.
2009-10-19 19:30, By: syspig, IP: [126.96.36.199]