Can multiple retirement accounts and vehicles be used for a 72(t) distribution?

There are several avenues, we can take to structure the income that you want or need, assuming it within reasonable expectations.

Let’s say you lost your job and need to maximize the income you can take now for whatever reason (to pay bills, rent/mortgage payments, education expenses for children, etc…), but your retirement assets are spread out over your current 401k, an old employer 401k or maybe a Pension, and you’ve been saving in an IRA… You can aggregate all applicable retirement accounts into one IRA and calculate income off the total balance.

Another scenario maybe you are still working and your goal is to simply increase your current income temporarily and maintain your retirement account(s) for when there is no penalty for withdrawals, and in anticipation of social security income down the road… You can split one IRA into multiple IRA’s, drawing the 72t income from one and allowing the other account to continue to defer taxes. Basically, we can shift and dissect your portfolio to make this 72(t) option a valuable contributor to your retirement.

If you would like help properly structuring your early retirement, please contact us today.

How do I get my retirement money or 401(k) without penalty?

If you take a distribution from your retirement plan early (meaning before the day you turn 59 ½ or Age 55 if still in a 401k) you will generally have to pay a 10% early distribution penalty above and beyond any regular income taxes you may owe on the money.

Of course, it’s generally a bad idea to dip into your retirement plan early except in extraordinary circumstances. But when using your retirement funds is your only option, it’s good to know that there are several ways to avoid the extra 10% penalty on early distributions.

The most commonly needed is establishing a series of Substantially Equal Periodic Payments (SEPP)


Are there any early 401(k) distribution options including 72(t)?

If you separate from service in the calendar year in which you turn 55 or later, you may be able to take distributions from your 401(k) penalty free; however, income taxes will still apply. There are additional exemptions which may allow you to avoid the early withdrawal penalty, such as: permanent disability, medical expenses that exceed 7.5% of your adjusted gross income, death of the plan participant, payments under a QDRO, certain distributions to qualified military reservists called to active duty and 72(t) (also known as series of substantially equal periodic payments).