# Younger than 55

L1: Younger than 55Hi. I retired at 53 yrs. and rolled over my 401K (~ 200K) into an IRA. I’m turning 55 yrs. in September. Can I use the 72T rule? Also, if I need 20K per year out of my SEPP, how come my balance has to be 500K+ per the reverse calculator, when 20K X 5 yrs. = 100K? Great forum! Thanks.2010-05-19 14:42, By: Joe, IP: [173.162.185.197]

L2: Younger than 55Good morning Joe:I’m turning 55 yrs. in September. Can I use the 72T rule?You can start a 72(t) plan until you reach age 59 1/2. After that age you don’t need a 72(t) plan. Since you are just 55 then 72(t) is most appropriate for you.Also, if I need 20K per year out of my SEPP, how come my balance has to be 500K+ per the reverse calculator, when 20K X 5 yrs. = 100K?72(t) distributions are based on your life expectancy, not thesimple fact that you only need funds for 5 years. Run the distribution calculator using your actual account balance and the amortization method to determine how much you are allowed to take each year.If you really need $20k per year then plan on making “penalty distributions” from your IRA. If you get a new job then you can stop withdrawals at any time to preserve assets.Jim2010-05-19 14:55, By: Jim, IP: [70.167.81.119]

L3: Younger than 55Hi. Thank you for sending me to the correct calculator. With the 200K, I’m able to draw $10,890 annually penalty-free. I guess my 2 options to get to $20,000 are:1. Cut expenses so I don’t need as much money.2. Satisfy the $20,000 by paying the penalty on the remaining needed monies. The penalty method gets very expensive when you add the 10% fine with the tax due (my state has a state tax). Thanks again. Joe2010-05-19 16:00, By: Joe, IP: [173.162.185.197]

L4: Younger than 55Work on your first item as this will be the best choice.After reading your second idea I’m afraid you don’t understand how 72(t) works. It sounds like you plan to take $10,890 from your $200k 72(t) plan, and then take the balance, $9,110, from the same IRA account and pay the 10% penalty on the second amount.IT DOESN’T WORK THAT WAY!!!If you set up a compliant 72(t) plan and withdraw $10,890, then take an additional $9,110 from the same IRA account, you immediately “Bust” the plan and all distributions are subject to the 10% penalty! You will need a different source of funds – SEPARATE FROM YOUR 72(T) IRA – to find the $9,110 per year.Jim2010-05-19 16:43, By: Jim, IP: [70.167.81.119]

L5: Younger than 55One possible solution to reduce your penalty somewhat is to mathematically figure a reduced amount for your IRA balance for the SEPP and partition your IRA into two accounts before starting your plan. The SEPP distributions from one IRA would be penalty free and distributions from the other account would be penalized.For example, if you have a balance of 200k and partitioned your IRA into an account for 130k for your SEPPand 70k for the non SEPP,you would get an approximate distribution of 7,080 from your SEPP account and would have enough in the other account to take out 14,000 each year assuming no gains or losses. The total distribution would be around 21k. The 14,000 would be penalized, but the 7,080 would avoid the penalty.While this is not the greatest outcome, it certainly beats paying the penalty on the entire amount because you busted your plan at some point in time.2010-05-20 04:09, By: Alan S., IP: [24.116.165.60]