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On October, 3, 2002, the U.S. Treasury
issued Revenue Ruling 2002-62, which contains new regulations pertaining
to 72(t) payments.
Under IRS Revenue Ruling 2002-62 taxpayers can
change from year to year their pension distribution amounts based on the
value in the account from which the distributions are being made. This means
if you are receiving fixed payments from an IRA or retirement plan you can
elect without penalty to receive smaller or bigger payments based on the
value of your account as it changes from year to year. For more information
visit http://www.ustreas.gov/ |
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| Background on 72(t) Substantially
Equal Periodic Payments |
To discourage you from receiving a distribution
from your IRAs or qualified pension plans before you reach age 59½ the Internal
Revenue Service imposes a 10% tax penalty on the amount withdrawn. This
penalty tax is in addition to the ordinary income tax that you are required
to pay on your retirement distributions.
The 72t "substantially equal periodic payments" payout exception allows
you to access your retirement funds early without the 10% early distribution
penalty.
Once you have left an employer you can roll over
your qualified retirement money to your own IRA rollover account tax-free.
There is no limit on the amount that can be rolled over tax-free. The "substantially
equal periodic payments" payout exception will eliminate the 10% penalty
on amounts you withdraw from your IRA pension accounts. You will still have
to pay the regular taxes on any pension funds that you withdraw regardless
of age or distribution method.
Roll over your lump sum distribution pension
funds in a newly established IRA Rollover account to simplify record keeping
and tax treatment. It is in this new IRA rollover account that you will
have the flexibility to implement a "substantially equal periodic payments"
payout program. You can set up this special payout program for just one
IRA account or all of your IRA accounts. Very specific methods of calculations
must be used to determine the exact amount that you can receive. A botched
payout schedule may result in your paying the 10% penalty which you are
trying to avoid.
Our firm has helped many clients with tax-free
rollovers. To obtain a free IRA Rollover kit, fill out the Application
Request Form.
For other strategic ways to take out retirement
money without penalties visit our homepage. |
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