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The law allows SEPP also called 72(t) distributions (and in IRS publications annuity distributions) to begin without penalty prior to age 59-1/2.

Actually, it is IRC §72(t)92)(A)(iv).

The allowed payments are intended to last for your life expectancy. Therefore, if you are young, they will be small--perhaps as little as 2% of the account balance per year.

I am uncertain. I have never read an authoritative publication that suggests that SEPPs are really supposed to last for one's lifetime. However, the methodologies suggested in Notice 89-25 would lead one to that conclusion.

The payments may be calculated three different ways--which gives some flexibility in size of payments--but still intended to last your full life expectancy.


Your plan custodian will usually be willing to calculate the estimated distributions in your case.

Usually not true.

The main requirement of SEPP distributions is that once begun they must continue for the longer of 5 years or until you reach age 59-1/2.


If for any reason you fail to make a distribution in a given year, you will be assessed penalties on all previous distributions under the plan.

Partially true. Let's mot forget statutory interest for all of the intervening time periods.

The great concern is that the underlying account may not earn sufficient assets to allow distributions for all the years required.

Not true. There are a variety a devices available to help; if not eliminate, pre-mature "account exhaustion".

Therefore, SEPP distributions are best suited to those close to retirement or must necessicarily be conservative.

Again, not true.

The IRS Publication on IRAs (Is it Publication 590?) has a section on SEPP distributions and gives an overview of the rules. That is a good place to begin for more information. You will also find books on IRAs in your local library or book store. Most of them have chapters on SEPP distributions.

Actually, the most untrue of all. 99% of all publications on the shelf at any bookstore you might choose to visit have no information on §72(t) distributions (actually a blessing in disguise). Those that do are more misleading in that they are 80% to 90% flat-out WRONG.

IMHO, one should visit and go shopping.

(Who has had one too many and is on a rant)
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