Early Withdrawal of an IRA – 72(t) Exceptions

In our first post about early withdrawal from an IRA, we mentioned that there were several exceptions in the Internal Revenue Code that allow an early withdrawal from your IRA or 401(k) without the 10% penalty being imposed. The section of the IRC that deals with quite a few of these exceptions is called Section 72(t) (referred to as §72(t) for short), and there are several subsections in this piece of the Code. Each subsection, listed below, has specific circumstances that must be met in order to provide exception to the 10% penalty. Clicking on the link for each subsection will provide you with additional details about that exception.

§72(t)(2)(A)(i) – age 59 1/2.

§72(t)(2)(A)(ii) – death at any age.

§72(t)(2)(A)(iii) – disability at any age.

§72(t)(2)(A)(iv) – series of substantially equal periodic payments (SOSEPP).

§72(t)(2)(A)(v) – separation from service on or after age 55 (401(k) only).

§72(t)(2)(A)(vi) – 404(k) dividends.

§72(t)(2)(A)(vii) – levy on a qualified plan

§72(t)(2)(B) – medical expenses.

§72(t)(2)(C) – qualified domestic relations order (QDRO) – upon a divorce settlement

§72(t)(2)(D) – health insurance premiums.

§72(t)(2)(E) – higher education expenses.

§72(t)(2)(F) – first time home purchase

In another post we’ll go into the details of §72(t)(4), which describes the penalties and circumstances surrounding making changes to the SOSEPP (described in §72(t)(2)(A)(iv)), which can be quite severe, and which can take up quite a bit of time to discuss. For now, the sections above should suffice to keep us busy for a while.

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Jim Blankenship, CFP®, EA, is an expert in personal retirement, IRAs, and tax issues, with more than 20 years of experience in the industry.  . Read more from this author