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Hi,

I'm not active on this board, so if this topic has been discussed, would you please offer a post number.

I'm looking for someone with experience in early IRA withdraw using the following exception:

"You can avoid the 10% early withdrawal penalty by taking funds from your 401k (or any qualified pension plan) in equal installments over a certain period of time. Specifically, the law says that if the distrubtion is part of a scheduled series of substantially equal periodic payments made over the life expectancy of the participant and the beneficiary, the 10% penalty will be eliminated. However, once this annuity form of payment is elected, it cannot be switched until five years have elapsed or until age 59 1/2- whichever is longer."

I have questions about the process and about the amount of tax that i would pay on the withdrawal. My husband is 41, and I'd be 40, and I need to make sure I'm understanding the life exp. table. Say we took $200,000 every year out of the IRA, we would pay whatever the tax is that year, just like that was regular income? Once we have claimed this process, can we still work full-time? Thank you for your time.
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Probably the best place to learn about early withdrawals from qualified plans is www.72t.net. It's free.

TheBadger
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healthiersouth: "I'm looking for someone with experience in early IRA withdraw using the following exception:

"You can avoid the 10% early withdrawal penalty by taking funds from your 401k (or any qualified pension plan) in equal installments over a certain period of time. Specifically, the law says that if the distrubtion is part of a scheduled series of substantially equal periodic payments made over the life expectancy of the participant and the beneficiary, the 10% penalty will be eliminated. However, once this annuity form of payment is elected, it cannot be switched until five years have elapsed or until age 59 1/2- whichever is longer." "


The Retire Early Home Page board has a number of people who are taking Substantially Equal Periodic Payments (SEPPS) and its FAQ would have some useful information. IIRC, this board is now in the Investment Club folder on TMF.

"I have questions about the process and about the amount of tax that i would pay on the withdrawal. My husband is 41, and I'd be 40, and I need to make sure I'm understanding the life exp. table. Say we took $200,000 every year out of the IRA, we would pay whatever the tax is that year, just like that was regular income?"

Yes.

You must have one hellaciously large IRA if you can SEPP $200k/year for 18 or 19 years.

"Once we have claimed this process, can we still work full-time?"

Yes, but why would you want to keep working full-time.

TheBadger:

Probably the best place to learn about early withdrawals from qualified plans is www.72t.net. It's free.

TheBadger is being too modest. He is a regular on the REHP board and quite knowledgeable himself.

Just remember that once you start to SEPP, you must continue for at least 5 years minimum and until you are 59 (or 59 1/2), [absent very, very unusual circumstnaces and also probably a Private Letter Ruling from the IRS], otherwise all the prior SEPP distributions are deemed early withdrawals and you will owe 10% penalty on all of them.

Regards, JAFO
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Not just in the law, but the "Plan Document" MUST be written to accommodate under/coupled with ER (Early Retirement) provisions. Some do, most don't. And the law changed the exception permitted with OBRA 93, tho the annuity calculated payment form is still a required option, especially today.

"You can avoid the 10% early withdrawal penalty by taking funds from your 401k (or any qualified pension plan) in equal installments over a certain period of time. Specifically, the law says that if the distrubtion is part of a scheduled series of substantially equal periodic payments made over the life expectancy of the participant and the beneficiary, the 10% penalty will be eliminated. However, once this annuity form of payment is elected, it cannot be switched until five years have elapsed or until age 59 1/2- whichever is longer." "


KBM (arcane details R us)
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