What is there to know about 72t versus 401k distributions at age 55?

Answer by  Chaneygirl (1755)

72t means substantially equal payments. That is, by electing this type of treatment, you will withdrawl equal payments until you reach age 59 1/2 pr a minimum of 5 years.

Answer by  katdocnorf (21)

401k distributions at age 55 require a 10% penalty be paid. However under the 72t rule you can retire then roll your 401k into an IRA and receive distributions without being penalized.

Answer by  cgroverla (516)

IRS Code Section 72t is a type of 401k distribution which allows a non-employed person 55 or older to take substantially equal periodic payments from his 401k without penalty.

Answer by  lynn (821)

i am not sure about a 72t but if you take a distribution of a 401k at age 55 you will have to pay a penalty for it on your taxes even if they take taxes out on it. You have to wait till you are 59 and a half to take a 401k distribution without paying a penalty.

Answer by  emw99 (6)

A 72t is superior in that it precludes the ten percent early withdrawal fees associated with 401K distributions. Incurring unnecessary fees via 401k distributions can greatly decrease the effective yield you experience on your investment portfolio. To avail yourself of a 72t distribution you must roll over your 401k into an IRA account.

Answer by  FinanceGuy (82)

72t is an IRS rule that allows you to take money out of a tax-deferred account before age 59 1/2 and avoid the 10% IRS penalty. However, if you retire, quit or are fired at age 55, you can take 401k distributions without worrying about the 10% penalty.