L1: DisabilityI have qualified for a non occupational disabilty pension due to illness. I am fortunate to have saved a few dollars in a 401k and an IRA.I would first of all like to roll all thefunds into one account but most importantly being younger than 59, I would like to receive funds from my account to offset some of my living expenses. Can I do so without penalty? Must I take equal payments? I do not require funds withdrawn every month but only as need be.
Thank You2008-04-28 20:17, By: Cobra, IP: [18.104.22.168]
L2: DisabilityIf you are totally and permanently disabled, distributions from any of these plans are penalty free. If you collect SSD, that generally will be found to meet the requirement, and there is no need to subject yourself to the rigid requirements of a 72t plan.The following definition of disability is pasted from this site:
Q. What is the Definition of Disability for 72(t)?? A. The definition of disability can be found in IRC Section 72(m)(7). In one case,Dwyer v. Comm., 106 TC No. 18 (1996), the Tax Court agreed with the IRS and stated… For purposes of this rule, an individual is considered disabled if “he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and infinite duration.” The Code specifies that an individual must be able to furnish proof of his disability in whatever form and manner that the Service may require. The court noted that the regulations under Section 72 also state that an impairment that is remediable does not constitute a disability.>>>>>>>>>>> >>>>>>>>>>>>>>>
If you do not qualify under the above, you still may have a chance to take penalty free distributions from the 401k plan if you separated from service in the year you turned 55 or later, AND the plan will allow periodic adjustable distributions directly from the plan. At 59.5, you could then transfer the balance to an IRA.These two possibilities should first be considered before starting a 72t plan.
2008-04-28 21:51, By: Alan S., IP: [22.214.171.124]
L2: DisabilityAlso, if your company”s retirement plan or 401-K had company stock contributed by the company for their contributions over the years, and it had appreciated significantly, then ask the HR department for the COMPANY”S cost basis for its contributions. You might do better, very much better, if their is this NUA (NET UNREALIZED APRECIATION in EMPLOYER SHARES) in the 401-K, or other, non-IRA, plan.
Check out the other postings on this list serve about NUA.2008-04-28 22:35, By: dlzallestaxes, IP: [126.96.36.199]
L2: Disability Thank you for your reply, unfortunately I do qualify as stated in the Rule 72 definition of disability. Your website is most informative and of great assistance.
Thank You2008-04-29 06:42, By: Cobra, IP: [188.8.131.52]