Establishing a 72T Program

L1: Establishing a 72T ProgramI will turn 55 in November and will retire January ’08. I have a retirement account and a thrift savings account. My question is can I take part of my savings account out, pay the taxes and put it in savings to weather the 5 years till 59 1/2 ? This shouldn’t effect my 72T with the government by me having a 20 or 30 thousand dollar savings account.?2007-10-07 19:51, By: barr, IP: [24.117.95.27]
L2: Establishing a 72T ProgramYour situation is not entirely clear as to the types of accounts and which ones are with your current employer.
However, a TSP plan can offer you installment payouts until you reach age 59.5 which will be penalty free under the age 55 separation rule, which you will meet. With periodic payments from the TSP plan, you do not need a 72t plan at all and you avoid the restrictions inherent in a 72t plan.
It”s not clearhow the other retirement or savings account you have relates to the TSP, so you will have to clarify that. Once any account that qualifies for the age 55 separation exception is rolled into an IRA, the exception is lost, and that might force you into a 72t plan.
Please post any clarification and follow up questions.2007-10-07 20:47, By: Alan S., IP: [24.116.165.60]

L2: Establishing a 72T ProgramI currently have a 401K and a thrift plan with my employer. 4 years ago I rolled a large majority of my thrift savings into an account with Morgan Stanley.My Morgan Stanley financial advisor has looked at everything and decided it would be more beneficial for me to do a 72T. He was advising me to take my 401K and my thrift and roll it into my current account with Morgan Stanley, however I was thinking of pulling out some of the thrift savings money paying the taxes on it and establishing a savings for the 5 years that I”m in the 72T. I was just wondering if the government frowns on having a large savings account and being ina 72T?2007-10-08 18:36, By: barr, IP: [24.117.95.27]

L2: Establishing a 72T ProgramGood morning Barr:
Please clarify one very important point. Are you a Federal employeecovered byeitherCivil Service Retirement (CSR) or Federal Employees Retirement System (FERS), or are you employed in the civilian sector?
From your first post it sounded like you may be a Federal employee, which explains Alan”s comment about TSP. But in your second post it sounds like your are NOT a Federal employee. Once you make this distinction then we will better understand your situation and can give better advice.
Jim2007-10-09 06:52, By: Jim, IP: [24.252.195.14]

L2: Establishing a 72T ProgramI would check to see if your employer allows you to take periodic withdrawals from your 401-K after you retire. If so, then you SHOULD NOT roll over your 401-K to your broker, but rather start taking withdrawals as needed next January from your 401-K. Because you will be over 55 and have “separated from service”, you will not be subject to the 10% penalty for early distributions from your 401-K. (By the way, early distributions from IRA accounts are subject to the 10% penalty unless you have a SEPP 72-T plan, but this does not apply to 401-Ks.) This way you won”t have to worry about an “emergency fund” for the next 5 years either.
The only reasons someone might even consider rolling over a 401-K to an IRA betwen 55 and 59 1/2 would be if the employer”s plandoes not permit withdrawals at 55 upon separation, or if the investment options in the 401-K are just so bad.
Further, since your “financial advisor” did not know even this basic regulation, I would hope his investment advice is better than his technical advice. If not, then consider changing financial advisors, and/or getting a good tax accountant to advise you in retirement tax matters.2007-10-09 10:12, By: dlzallestaxes, IP: [141.151.92.47]

L2: Establishing a 72T ProgramI am in the civilian group. Our company has had a thrift savings since 1974, they would match $1 for $1 up to 5% of your wage.2007-10-09 15:54, By: barr, IP: [24.117.95.27]

L2: Establishing a 72T ProgramDoes your plan allow you to stay in the plan after retiring, and to take distributions from then, or do you have to wait until 59 1/2 ? Check with your Human Resources dept.2007-10-09 18:35, By: dlzallestaxes, IP: [141.151.92.47]

L2: Establishing a 72T ProgramSorry to cut in on this post, but Jim, I was eager to see your comments on my post on July 24 relating to the TSP?2007-10-10 17:00, By: Tony, IP: [207.255.95.42]