IRA withdrawal

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L1: IRA withdrawalHere is our situation: My wife age 56 has a brain tumor which has a prognosis of at best 3 years probably less. I just tuned 57 and would like to be there for the time we have left. I have an IRA with enough money in it to get us through the 3 years and an 401k with my current employer. I want to retire at least until this situation comes to a close but would have to withdraw money from my IRA or my 401k (but not both). Is there a provision that would allow me to do this without penatly? Also what would happen if I then returned to work should this situation end before I am 59.5?2010-01-25 15:08, By: chriscc57, IP: []
L2: IRA withdrawalVery sorry to hear of your situation.You have various options here:1) Plan A would be to check with the SPD orplan administrator for your 401k plan to determine what flexible withdrawal options it provides after you retire. Because you will have retired at 55 or later, any distributions will be penalty free under the age 55 separation exception. 2) Plan B – If the plan does not offer flexible enough options, then you could proceed with a direct rollover to an IRA. After determining how much in current expenses you would need to withdraw each year, you could use the reverse calculator to partition this rollover IRA and/or your current IRA to create one with an account balance that will generate the distribution needed. The other IRA account could be kept for emergencies. If you will have sizeable medical costs, you could take them out of the non SEPP IRA with a penalty exception for medical costs over 7.5% of your AGI. This will apply to the medical costs of either of you. Be sure you fully understand all the requirements of a SEPP (72t) plan before you act, because they are very rigid.A SEPP plan in your case must last 5 years and would be a fixed dollar amount each year. For the first year, you could take the full annual or pro rate the annual amount by the month of your first distribution. If you return to work, you can substantially reduce your SEPP payout by making a one time switch to the MD method. This may reduce your payout by 40-50% or so if your IRA balance does not change much. If you get large gains in the IRA, it will reduce it less or could even result in an increase, but increases are very rare. If you failed to follow your plan exactly, you would owe retroactive penalty and interest for all distributions you took up to age 59.5, but you plan must continue for 5 years in any event.2010-01-25 17:34, By: Alan S., IP: []

L3: IRA withdrawalThanks for the reply. It looks like I would need to choose plan B. I don’t think the medical bills will run to high but it is good to keep that in mind. Who is the SEPP plan set up with?Also when you say MD method do you mean Minimum Disburment or Monthly Disbursment?DoI understand correctly that once this plan is started, I must take the money disbursed for5 years. I think the amount I might need during the first three years or less will be more than the last two years. Does it have to be equally spread across the 5 years?Thanks in advance for your reply2010-01-25 19:03, By: Chriscc57, IP: []

L4: IRA withdrawalStart by spending some time to figure out what a SEPP plan is all about. Start with our FAQ- then go to our calculator page and enter your information. The calculator will give you the annual distribution based on your IRA balance and your age.SEPP stands for Substantially Equal Period Payments and each of the annual payments for each of the 5 years will be the same amount.2010-01-25 19:17, By: Gfw, IP: []