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I am 44 and have $1.2 Million currently in my regular IRA.

I would like to know how I might take money out each year WITHOUT incurring the 10% penalty before 59 1/2. (I already know about medical, college, etc.) How can I do this if I just want to travel or pay off the house early?

I heard that it may be possible but that the amount withdrawn must be the same each year or is based on life expectancy and that withdrawals must continue once started.

Any ideas. And yes I expect my IRA to continue appreciate.

Thanks Big
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Big writes,

I am 44 and have $1.2 Million currently in my regular IRA.

I would like to know how I might take money out each year WITHOUT incurring the 10% penalty before 59 1/2. (I already know about medical, college, etc.) How can I do this if I just want to travel or pay off the house early?

I heard that it may be possible but that the amount withdrawn must be the same each year or is based on life expectancy and that withdrawals must continue once started.

Any ideas. And yes I expect my IRA to continue appreciate.


Check out the following link:

http://www.geocities.co/WallStreet/8257/wdraw59.html

It explains how to make penalty-free withdrawals from your IRA before age 59 1/2. There is also a free calculator to help you determine the amount of your IRA distribution.

intercst

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There's a bad link in post #16141. Here's the correct one:

http://www.geocities.com/WallStreet/8257/wdraw59.html

intercst
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Greetings, Bigstockweaver, and welcome. You wrote:

<<I am 44 and have $1.2 Million currently in my regular IRA.

I would like to know how I might take money out each year WITHOUT incurring the 10% penalty before 59 1/2. (I already know about medical, college, etc.) How can I do this if I just want to travel or pay off the house early?

I heard that it may be possible but that the amount withdrawn must be the same each year or is based on life expectancy and that withdrawals must continue once started.

Any ideas. And yes I expect my IRA to continue appreciate.>>


You have heard correctly. Essentially, you must take what's called a Section 72t withdrawal as a series of "substantially equal periodic payments (SEPP)" based on your life expectancy or the joint life expectancies of you and a designated beneficiary. There are three IRS-approved methods of doing so, each resulting in a different amount you must take each year. Once you begin, you cannot change the method selected and you must continue taking SEPP for the longer of five years or until you attain the age of 59 1/2. In your case, that means a little over 15 years.

Intercst provided you a link to his excellent Retire Early Home Page. He provides a calculator there that will help run some example numbers of what to expect. For a further explanation, you can read the "Taking the Money Early" article in our expanded Retirement Area that debuts tomorrow, December 13.

Regards..Pixy
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Thanks Pixy & Intercst

Great site.

I'm leaning toward the 120% of LT fed rate method. I believe I can make 15% a year ave. on the balance and
would leave me over $5 Mill at age 60. Seems like plenty to me.


Next question - I have a will and need to set up a Revocable Living Trust and possibly a Bypass Trust for my Kids and need to educate myself on the subject. I'm talking to a financial planner but at $150/hr I want the conversations to be short.

Any other great sites for trusts??

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Can I split my IRA account into two accounts and only withdraw from one account or is the amount calculated on the total IRA accounts value?

I thought about taking $500k and putting it into another IRA account. Then taking withdrawals based on the original account with a balance of $700k using the 120% method. This way if I take it out too fast I have another account as backup. Or both accounts grow fast, I could start withdrawals later on the second account when I felt like it.

Possible?

Big
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Bigstockweaver asks,

Can I split my IRA account into two accounts and only withdraw from one account or is the amount calculated on the total IRA accounts value?

Yes, you can split an IRA into 2 new IRAs and then take 72(t) distributions from one while leaving the second IRA intact. Check out the FAQ on IRAs at the following link:

http://www.geocities.com/WallStreet/8257/wdrawfaq.html

intercst

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Can I split it AFTER I start the withdrawal process on a specific account? Or do I have to do it BEFORE, such as before Dec. 31.?

Big
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<<Can I split it AFTER I start the withdrawal process on a specific account? Or do I have to do it BEFORE, such as before Dec. 31.?>>

You must do it BEFORE you start taking 72t withdrawals.

Regards..Pixy
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Bigstockweaver asks,

Can I split it AFTER I start the withdrawal process on a specific account? Or do I have to do it BEFORE, such as before Dec. 31.?

No, you can't do it AFTER.

Once you begin 72(t) withdrawals on an IRA account you can't split the account. The withdrawals must continue for 5 years or until age 59.5, WHICHEVER IS LONGER.

intercst

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Bigstockweaver wrote:
Next question - I have a will and need to set up a Revocable Living Trust and possibly a Bypass Trust for my Kids and need to educate myself on the subject. I'm talking to a financial planner but at $150/hr I want the conversations to be short.

Any other great sites for trusts??


I have found that the Inheritance Strategies Board is a good place to go for this type of information. There are several very knowledgable people posting there.

rkm
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