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72t Exceptions Explained

Completing your 72t early retirement distribution and documenting your IRS 72t exceptions correctly, will provide a stream of retirement income.

Reasons for an Early Withdrawal Using 72(t)

A 72(t) early distribution will not be subject to the 10% additional early withdrawal tax in the following circumstances…

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Do I pay any taxes on a 72t early distribution?

Retirement accounts are 100% tax deferred until you start taking withdrawals. Remember, 100% of the dollars taken from your retirement account will be added to your adjusted gross income when filing your taxes.

72(t) distributions planning

How are 72(t) distributions calculated by using the IRS 72(t) rule?

There are 3 IRS standard methods on how 72(t) distributions are calculated: Amortization Method, Annuitization Method, & Required Minimum Distribution Method

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How is life expectancy determined and what interest rate is used on a 72t distribution?

When setting up a 72t distribution, the IRS life expectancy tables are: Uniform Life, Single Life, Joint Life & Last Survivor table.

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What happens if I don’t maintain my 72(t) distributions correctly?

There are several ways you can “bust” a 72(t) distribution, and the consequences can have a severe impact on your taxes if the account is not managed properly.

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What will be my 72t interest rate or expected rate of return?

Our goal is to generate a return similar to the rate that you are withdrawing funds from the account each year, so that you finish the 72t period with about as much as you began with.

72(t) Exception Early Retirement

72(t) Exception

We are also often asked “Is there a 72(t) exception” to IRS rule 72(t) for early retirement income. Most retirement plan distributions are subject to income tax and may be subject to an additional 10% tax (and additional penalties).

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What is a 72t Distribution Penalty?

TIP: We have effectively set up 72t distributions for penalty free income many times throughout almost 50 years and this strategy works, IF DONE CORRECTLY.

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