Rich asks:I have a further question. I want to start a Roth IRA to provide income from age 50 until I can withdraw from my 401(k) at 59 1/2. Do the same Section 72 rules and the 10% penalty apply to IRAs? If so, what are the alternatives? Can the distribution be evenly divided over the 9 1/2 years from 50 to 59 1/2 or does it have to be life expectancy? Would a basic non-IRA savings account be better than a Roth for the 50's? The same rules apply to a 401k plan as they do to IRAs on early withdrawals with one exception. If the money is still in the 401k (i.e., it has not been transferred to an IRA), if you are no longer working for the plan sponsor, and if you are age 55 or over, then you may take 401k money without penalty. Otherwise, the magic age remains 59 1/2 for either the 401k or the IRA, and the Section 72(t) rules apply to avoid the 10% penalty.No, the distributions cannot just be divided over 9 1/2 years. They are based on your or your and a beneficiary's joint lifetime(s). As to a Roth, remember you can take your contributions at any age free of tax and penalty. Once those are used up, you are into earnings, and those may not be taken except in limited circumstances younger than age 59 1/2 free of taxes and penalty. If you want the money for living expenses, then the earnings will have to be taken under the rules of Section 72(t) to avoid the penalty.Regards…..Pixy
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