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I would like to retire at age 55. I will have about 300,000 in my company 401K and will also be getting a lump sum of about 400,000 additional from the company pension plan. Since I am not 59 1/2 I believe I will need to use IRC 72 (t) to avoid paying the 10% penalty. My question is do I have to put all the money into one IRA or can I split it up any way I want, into as many IRA's as I want and then pick the IRA to draw from using IRC 72 (t)? For example if I decided I wanted to draw 50,000 per year for the 5 years can I set up an IRA with 250,000 and draw from that one and not touch the others?
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RJW,

... if I decided I wanted to draw 50,000 per year for the 5 years can I set up an IRA with 250,000 and draw from that one and not touch the others?

You're on the right track, if you have something like $750,000 total in the set of IRAs -- i.e., 500,000 in the ones you're "not touching". I didn't run any numbers for that estimation -- just took a shot at it.

For example, if you had $2 million, you could move $$ around and designate just the $250,000 and the $500,000 as the ones for the 72(t), and let the other $1,250,000 grow independently.

I know of two good links -- <www.fool.com/retirement/manageretirement/manageretirement9.htm> and <www.geoworld.com/WallStreet/8257/wdraw59.html>

IMHO, both are required reading/visiting for someone in your situation and with your questions.

Good luck,
Phooley
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I zoned-out on the fact that you said you have a total of $700,000 available -- I tried the JavaScript calculator on intercst's site, and I think you're in the ball park with that -- I shouldn't have implied you might be $50,000 short.

But if you do have some additional IRA money somewhere, as TMFTaxes says in his article, you can pick and choose which IRAs to include in the 72(t) SEPP.

Phooley
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I would like to retire at age 55.

Good for you.

I will have about 300,000 in my company 401K and will also be getting a lump sum of about 400,000 additional from the company pension plan. Since I am not 59 1/2 I believe I will need to use IRC 72 (t) to avoid paying the 10% penalty.

Maybe, maybe not.

My question is do I have to put all the money into one IRA or can I split it up any way I want, into as many IRA's as I want and then pick the IRA to draw from using IRC 72 (t)?

You can have as many IRA's as you like.

For example if I decided I wanted to draw 50,000 per year for the 5 years can I set up an IRA with 250,000 and draw from that one and not touch the others?

Conceptually yes; however using §72(t)(2)(A)(iv); you will need a minimum account balance in the range of $575,000 in order to generate $50,000 of annual withdrawals using one of the three IRS approved methods.

Back to your 401(k) plan. If oyu are 55 or older within the same calendar year as you terminate your employment AND you leave your 401(k) assets in the plan, e.g. DO NOT roll them over into an IRA; you may directly withdraw any amount you so choose directly from the 401(k) without incurring penalties. All of this is doable pursuant to §92(t)(2)(A)(v).

Lastly, I suggest that visit the Reite Early Homepage; there are lots of posts on this very issue.

TheBadger
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