Separation from Service Exemption

L1: Separation from Service Exemption I would also like to retireJuly 2008 at age 55.My companys plan will allow the separation ofservice exemption.
Ihave about 300,000 in my 401 K and would need about $30,000 per year.
>> Removed Investments << I also will get a lump sum pension paymentestimated around 300,000. Iwouldlike to roll that over into something and not use that until I''m age 62 if needed. I''m also married and my husband will continue to work for about 10 to 12 years. I have met with 2 financial planners andevidenlty I do not have enough funds. When I leave their office I feel complete hope less. I have gain more knowledge from this site than by readinging the questions and answers. 2007-12-31 09:16, By: destiny1, IP: [216.80.125.206] L2: Separation from Service ExemptionYour question is really asking for investment advice and the purpose of this forum is to offer information on IRS Section 72t and 72q. Sorry, but we do not provide investment advice. I have therefore removed the section of your post that deals with specific investments.2007-12-31 09:22, By: Gfw, IP: [216.80.125.206] L2: Separation from Service ExemptionCheck postings on this forum about NUA (Net Unrealized Appreciation of Employer Stock). Your employer probably put the company''s stock as its contribution to the pension plan, and as its matching funds to your 401-K. If the company shares have appreciated significantly in value over the years, the WORST thing you can do is to rollover the 401-K and/or pension to an IRA. If your plans have NUA, you can save probably $50,000 to $ 100,000 in federal income taxes byhiring a tax practitioner who is knowledgeable in NUA stock provisions. Get J.K. Lasser "YOUR INCOME TAX" for a 2-page narrative to get an overview of this area. I saved a client similar to you over $ 100,000 in taxes involving NUA stock. P.S. MOST BROKERS HAVE NEVER HEARD OF NUA, and "advise" customers improperly into rolling over their company retirement plans into IRAs.2007-12-31 10:54, By: dlzallestaxes, IP: [151.197.26.13] L2: Separation from Service ExemptionDestiny: I would like to assist you. My email address is: rollover@optonline.net. Peace and hope, Joel L. Frank2007-12-31 16:16, By: Joel, IP: [24.187.32.203] L2: Separation from Service ExemptionIf you want professional advice on the nuances of NUA (Net Realized Appreciation) provisions of the tax laws, and to discuss the advantages and/or disadvantages of rollovers or alternative approaches in your situation, you can contact me at dlzallestaxes@msn.com2008-01-01 11:38, By: dlzallestaxes, IP: [151.197.60.154] L2: Separation from Service ExemptionHello, Destiny: If you have $300k in a retirement plan and want to take $30k per year for living expenses, that would be a 10% withdrawal in the 1st year and perhaps more than that in subsequent years if your investments grow at less than 10% per year. Given that and the many studies that show that a withdrawal rates of 4-5%or less aresustainable over a long period of time, theremight bea way for you to retire and get the $30k you need. That would be to roll your lump sum into your 401k, if the law and your 401k plan allow this, and then take a 5% per year withdrawal from the total amount of $600k. This would not allow you to set aside the $300k in the lump sum, however. You say that your plan allows the early separation from service exemption. Since it is the IRS code that allows this, but does not mandate it, I assume that you mean that your company will allow periodic post age 55 401k plan distributions. If so, then you could withdraw $2500 a month from your plan lump sum. If that is unworkable, the next possibility would be to roll both the 401k plan money and the lump sum into an IRA and set up a SEPP plan on that account. I am not covering the NUA nuances of this movebecauseothers heretake care of that aspect of the discussion. The bottom line seems to be that you probably can retire early and get your $30k per year payment, just not quite the way that you had hoped. Ed_B2008-01-04 18:04, By: Ed_B, IP: [67.170.159.37] L2: Separation from Service ExemptionEd, Mycompany plan would not allow me to add the lump sum pension amount to the 401K.SoImay have to combine both the 401k and the lump sum inan IRA to get the $30,000 a year SEPP. I''m going to set up another meeting with afinancial advisor. Sorry that Ipost the original question. 2008-01-04 20:18, By: destiny1, IP: [74.229.73.188] L2: Separation from Service ExemptionDestiny: Sorry to hear that you cannot combine your lump sum and 401k plan money. I''ve never had to deal with a lump sum distribution like that so thought that asking your employer about it would be worthwhile. As to being sorry about your original question... please don''t be. This site is dedicated to learning about the 72t exception to the 10% early withdrawal penalty tax. Most of us here are not experts in this area but want to learn as much as we can about it. This allows us to deal with the subject as effectively as we can, whether by creating and managing our own SEPP plan or by knowing enough to ask good questions of the people we hire to help us with it. Fortunately, there are also some folks here who are real experts in these matters and who are only too happy to share their knowledge and experience. Good luck with your SEPP plan and your coming early retirement. Ed2008-01-06 07:48, By: Ed_B, IP: [67.170.159.37]