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It seems to me that if I have enough money to retire, I don't have to worry about not being 59 1/2 in order to tap my IRA funds penalty-free.

Let me provide my reasoning:

Theoretical example-- At the age of 50, I have $800,000 saved in an IRA. I calculate that if I withdraw about 4% per year, or $32,000, I will be able to live comfortably *and* let my nest egg continue to grow.

However, of the 3 IRS-approved methods for no-penalty early withdrawal, one would provide me only about $20,000/year (too little), the others $69,000 and $72,000 (too much).

*But*, using one of the last two methods, why not split the IRAs and put just enough into one account to pay me what I wish? According to a financial planner's web site I happened upon:

"There is no requirement that all of your IRA accounts have to be aggregated in calculating the required withdrawal. Absent such a requirement, you can simply split the (in my case, $800,000) into two IRA accounts and move into the second account just enough cash to yield an annual payment of (in my case $32,000)... that would give you the ($32,000) you need and still allow you to escape the 10 percent penalty.

The IRS has issued a private ruling indicating the IRA accounts do not have to be aggregated for this purpose. While a private ruling can be relied on only by the taxpayer who requested it, such a ruling is an indication of the IRS's thinking on the question at issue."

So, if I'm able and willing to live on the same yearly income for ten years until I'm 59 1/2 (at which point I will be able to withdraw normally without penalty), can anyone find anything wrong with this?


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