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 Post subject: Get IRA Funds Early?
PostPosted: 05 Jun 2008, 10:25 
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If you have a lot of money in an IRA you might be interested in 72(t) distributions. They allow you to start taking a certain amount of money out now (and paying normal income tax on it) instead of waiting until you are 59.5. For most people this isn’t a good idea, but it is a good option to know about.

Most people think that they can't touch the money in their IRAs until they reach the age of 59 1/2. While it's generally true that you're not going to want to before that age, you should know you can tap into your retirement cash before then with no penalty owed to Uncle Sam. And you don't even have to be retired to get your hands on it. What makes this possible is a little known section (ssshhhh) of the Internal Revenue Code (IRC). Section 72(t)(2)(iv), stipulates that funds may be withdrawn penalty-free from an IRA or qualified retirement plan at any age prior to age 59 1/2. There is, of course, a catch. Actually, there are more catches than Jerry Rice has in the average season.

To qualify for this treatment, the withdrawal must be part of a series of "substantially equal periodic payments" determined by the participant's life expectancy or the joint life expectancy of the participant and a designated beneficiary (spouse, usually). There are three approved and accepted methods for receiving these payments, all of which result in a different sum paid to you. In each, you must pay ordinary income taxes on the withdrawal, but you will not have to pay the 10% "excise tax" due to a premature distribution.

More Info @ Motley Fool.

http://www.fool.com/retirement/managere ... ement9.htm


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