Another way to pull funds from an IRA or a qualified retirement plan (401(k), 403(b), 457, etc.) without having to pay the 10% penalty is to use those funds for Qualified Higher Education Expenses (QHEE). This comes up quite often, as parents are faced with the issues surrounding the dueling requirements of retirement saving and [...]
Posts under ‘Early Distribution’
Separation From Service On or After Age 55
Did you realize that there is a provision within the Internal Revenue Code that allows you to start taking distributions from your 401(k) plan before you reach age 59½? This little-known section of the code, §72(t)(2)(A)(v), can be a real dandy if you happen to fit the requirements. Note: although we will refer to the [...]
Penalties for Changing SOSEPP
So – you’ve begun your Series of Substantially Equal Periodic Payments (SOSEPP) from your IRA to satisfy your §72(t) requirement. Allofasudden, something happens that causes you to make a change to your payment – either purposely or by accident. What happens? . Well – first of all, we must understand the timeline associated with an SOSEPP: once [...]
SOSEPP & How a QDRO Affects It
In addition to the 72(t) exception available for folks with a QDRO (see this post), there is also the question of how a QDRO impacts an established Series of Substantially Equal Periodic Payments (SOSEPP) – which, as we know, once established can only be changed one time. Although not definitive, below are summaries of three Private [...]
401(k) & Qualified Domestic Relations Orders (QDRO)
An exception to the 10% penalty on distributions from a qualified plan (but not an IRA) is when the distribution is pursuant to the imposition of a Qualified Domestic Relations Order, or QDRO (cue-DRO). A QDRO is often put into place as part of a divorce settlement, especially when one spouse has a considerably larger retirement plan balance than [...]
The Ultimate “Do Over”
We’ve talked about it before – the decision of when to begin taking your Social Security retirement benefit is very important. (you can see my post on the subject here) The problem is, sometimes we aren’t in a position to delay receiving the benefit… or maybe we didn’t consider what a difference it would make [...]
In a Pinch for Cash? Be Smart About Your Options
Here’s an article with some very good advice on what or where it makes good sense to raise cash when you’re in a pinch, as many folks are now. Most importantly, the article points out, you need to consider the consequences of options like raiding your 401(k) or taking a home equity loan. You may trigger [...]
SOSEPP – Fixed Annuitization method
When calculating your Series of Substantially Equal Periodic Payments (SOSEPP), provided for under §72(t)(2)(A)(iv) of the Internal Revenue Code, one of your choices is the Fixed Annuitization method. Calculating your annual payment under this method requires you to have the balance of your IRA account and an annuity factor, which is found in Appendix B [...]
SOSEPP – Fixed Amortization Method
When calculating your Series of Substantially Equal Periodic Payments (SOSEPP), provided for under §72(t)(2)(A)(iv) of the Internal Revenue Code, one of your choices is the Fixed Amorization method. Calculating your annual payment under this method requires you to have the balance of your IRA account, from which you then create an amortization schedule over a [...]
SOSEPP – RMD Method
The Required Minimum Distribution method for calculating your Series of Substantially Equal Periodic Payments (under §72(t)(2)(A)(iv)) calculates the specific amount that you must withdraw from your IRA (or other retirement plan) each year, based upon your account balance at the end of the previous year, divided by the life expectency factor from either the Single [...]
And if you've come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed "advisor's advisor".
