![]() |
||||||||||||
![]() |
||||||||||||
|
||||||||||||
Search by KeywordProduct CategoriesOther ArticlesShopping Basket
Note: All prices in US Dollars
Specials |
For more information and special deals related to any of the issues on this page, place your cursor over the double-underlined links. All information supplied by Kontera.com.
Avoiding Penalties for Early Retirement![]()
Distributions from an IRA prior to age 59 ½ may be subject
to a 10% IRS penalty in addition to ordinary income taxes. Under Internal Revenue Code 72(t),
there are certain exceptions that will allow the 10% penalty to be waived by
the IRS, such as death, disability, medical expenses greater than 7.5% AGI, Substantially Equal Periodic Payments, etc.
The Substantially Equal Periodic Payments portion of the IRS Code 72(t) is of particular importance to early retirees, because it allows a person to access their IRA funds prior to reaching age 59 ½ without paying an additional 10% penalty. There are certain conditions that must be met, however, to take advantage of this exception. The conditions include:
The three methods of calculating the 72(t) SEPP payments are: Amortization method – think of this method the way you would your mortgage. The account balance is “amortized” over the IRA owner’s life expectancy or the IRA owner and designated beneficiary’s joint life expectancy. The interest rate used cannot exceed 120% of the applicable federal mid-term rate. Annuity factor method – The account balance is divided by an “annuity” factor. The annuity factor can be derived by using up to 120% of the applicable federal mid-term rate, the attained age of the IRA owner and the annuity table in Revenue Ruling 2002-62. Required Minimum Distribution method – The account balance is divided by the IRA owner’s life expectancy (use the IRS life expectancy table, either the single or uniform table). Just remember whichever table used must continue to be used for all subsequent years.
The annuity factor method often results in the highest income payment and the RMD method usually results in the lowest income payment. |
|||||||||||
askjanjaffin@aol.com No endorsement is made of any products advertised on these pages. |
||||||||||||
![]() |
![]() |