You are on the right track in terms of taking out only what's necessary to meet your needs and taking out the penalty either 1) though automatic withholdings as you draw or 2) at the end of the year as needed. You also have the advantage of 2 1/2 years to plan the penalty business since you will be penalty-free at 59 1/2.Another alternative to avoid the 10% penalty would be to take out the minimum you need to live on until year-end on a consistent basis. No penalties ned apply. You can actually do a financial impact comparison of both scenarios.The penalty is reported when you file your annual income tax return. Estimated taxes would be wise to avoid other related penalties. Keep in mind that if your withdrawals are decreasing from year to year,as long as you pay estimated taxes covering 90% of last year liability the IRS would be satisfied.Good luckFelix
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