Early retirement use of IRA and later a Non-Qualif

L1: Early retirement use of IRA and later a Non-QualifI am looking for help to understand if I can avoid paying the 10% early withdrawal penaltyby removing funds from a regularIRA.I also have a non-qualified annuity that I plan on usingseveralyears from now. At the moment, I want the non-qualified annuity to grow untouched.
Forillustration purposes, let’s say that I have $400K inthe IRA and$600K in the non-qualified annuity. I am “early retired” at theage of 50and living off a supply of cash that is not in retirement accounts. When that cash account runs down, next year I will probably start to withdraw money that is in a standard IRA to cover my expenses. I had expected to pay the 10% early withdrawalpenalty on this money, but then I ran across the 72T regulations. Can I, and if so, how do I set it up so that I do not pay that 10%penalty? 2005-11-01 15:35, By: windeguy, IP: [200.88.145.137]

L2: Early retirement use of IRA and later a Non-QualifBoth the IRA and Non-qual annuity have the Pre-age 59 1/2 early withdrawal penalty of 10%. In order to take money from either you set up a SEPP Plan under the appropriate 72(t) and or 72(q) sections of the code. Don”t get hung up on which 72 applies, they both work the same.
Since you apparently have some time to get ready, spend a lot of time working around on this site. Check out the FAQ”s, work with the calculators, buy Bill Stecker”s book which is a fantastic reference, and ask questions. Remember, there is never a dumb question … only dumb answers.
If all of your IRA money is “pre-tax” then all distributions will be subject to current taxation at the ordinary rates. If you have any “after-tax” contributions then use Form 8606 to calculate your non-taxable amount.
The non-qual annuity is a little different. If you “annuitize” under certain situations then part of the distribution is taxable and part is excluded from tax. I don”t recommend annuitization because you lose control of your money, and when you croak, it”s gone. The other option is systematic distributions under SEPP rules until you become 59 1/2 and have taken distributions for at least 5 years. Under this method you retain control and the balance goes to your family when you croak. The down side from a tax stand point is that all distributions above your cost basis is fully taxable at ordinary tax rates.
Before you take your first distribution from either account, my suggestion is to do your homework and seek competent tax and financial planning advice. Be sure your plan is sound froma tax stand point, and that you have a good financial plan to get the most out of the money you have accumulated.
Good luck.
Jim2005-11-01 16:03, By: Jim, IP: [70.184.1.35]

L2: Early retirement use of IRA and later a Non-QualifAfter reading Jim’s message, start by getting a good understanding of what you can, and can not do using a SEPP (Substantially Equal Periodic Payment) plan.
Based on the value of your IRA, use the calculators and determine if the amount available meets your objectives. If all works, talk to your tax advisor and get their opinion.
Just remember, once the SEPP is adopted, it must continue until the later of age 59.5 or 5 years from the date of the first payment.2005-11-03 04:55, By: Gfw, IP: [172.16.1.72]