Using 72T for paying mortgage
L1: Using 72T for paying mortgageJust curious, has anyone heard of using this 72T for mortgage payments for dislocated workers?
Chris2009-05-15 18:47, By: csmck, IP: [18.104.22.168]
L2: Using 72T for paying mortgageThere is no special program for dislocated workers, but you can use a 72t to fund any expenses you wish. A mortgage payment is a basic cost of living for most people, so if you need retirement funds without an early withdrawal penalty, a 72t plan would provide those funds. Most 72t participants are no longer working, but early retirement in the past has exceeded the numbers of those who plan to work but have lost jobs. Of course, the mortgage interest deduction might offset much of the taxable income from the IRA distributions as well.
For those temporarily out or work, the challenge here is that the 72t plan must run for 5 years or until 59.5, whichever is longer. So once you start a plan, if you find another job, you cannot stop the 72t plan and would then have to continue drawing down the IRA and you might also be bumped into a higher tax bracket.
If you were asking about any special programs due to the recession that involve 72t plans, there are none. This is probably because the 72t plan itself IS a program that can help ease the pain of job loss by eliminating the early withdrawal penalty on distributions needed for all types of living costs.2009-05-15 21:22, By: Alan S., IP: [22.214.171.124]
L2: Using 72T for paying mortgageChris-have specialized in 72t since 1992 and have had clients use 72t specifically to make mortgage payments on several occasions. Doesn’t matter if laid off or not, it can be an effective way to take care of a major payment w/o having to use current income, say, for exampleif one is still working and got an inservice distribution or left one employer and is now working at another but for less money. Having payment locked in can be advantage also. Good luck-sorry to hear you’re laid off.2009-05-16 14:59, By: john, IP: [126.96.36.199]
L3: Using 72T for paying mortgageThere are other federal programs for “dislocated workers” (i.e. workers who lose their jobs because companies closed their doors to take jobs overseas). While I do not believe that SEPP 72-T qualifies under this program, medical expenses in excess of 7.5%, and health insurance premiums for unemployed workers are 2 excdptions to the 10% penalty rule for early distributions. If you qualify under either of these 2 exceptions, then you could use those funds for those medical purposes, and help in that way towards your mortgage payments.
As mentioned previously, you do not need a specific purpose for the distributions from a SEPP 72-T, and mortgage payments would be a perfect use for such a program. However, you must continue a SEPP 72-T for the longer of 5 years, or to age 59 1/2. Hopefully you will not be out of work that long. So plan carefully before tying yourself up that long.
Also, if you are, or will become, 55 during 2009, and had a 401-K, you can take payments from that plan without penalty and without setting up a SEPP 72-T, if your former company permits it.
Further, check if your former employer had NUA employer stock in the company retirement plan or 401-K. If so, check the numerous postings on this website by me and others.2009-05-16 18:29, By: dlzallestaxes, IP: [188.8.131.52]