NOTE: the newly proposed Bush's RSA Retirement Savings Accounts and

LSA Lifetime Savings accounts may have different rules. E-mail me for updated

details on these NEW RSA and LSA retirement plans.

Here’s how it works. Let’s say you are still working but want to retire

(let’s say in this example) at the age of 55.  First you quit working.

Then you ROLL your 401k into an IRA. After the rollover is completed you

apply for a 72(t) “equally substantial distribution”. The IRS will offer

you (3) optional payout amounts. The (3) IRS optional payout methods

will tell you how much the “equally substantial distribution” will be based

on your age, the age of your beneficiary, the amount of money 

you have, the % rate used for the calculation and how long they expect

you to live (based on IRS's mortality table).

Here is an example for you:

An individual age 55 (with the same age beneficiary) who has $250,000

and wants to set up a 72(t), (using a rate of 4.23% for example) this

would be the payout options to choose from:

(NOTE: This information was provided by ING Variable Annuities customer

service dept.)

The rule is, once a rollover is completed and a72(t) is setup to pay out

an income stream, it must continue until the age of 59 ½ has been 

reached or for a minimum of 5 years, whichever comes last. For example,

if you start a 72(t) at the age of 57, it must run until you are age 62, 

then it stops. If you are age 50, then it runs until you reach age 59 ½,

then it stops.

After the 72(t) has stopped, then of course you can take out of your

IRA any amount you might desire or require. I need to point out, just

for clarification, that YES all the income you receive is Fully  “income taxable”

at your applicable income tax rate but without any added penalty.

NOTE: The above calculations are based on the NEW IRS 72(t) rules,

as recently established by Congress, effective January 1st, 2003!

A word of CAUTION!

Do it right and it works beautifully. Do it wrong by withdrawing too

much and you can end up broke! PLUS, the IRS may assess the 10% penalty

on all amounts withdrawn, if the IRA account runs out of money before 

the end of the 72(t) scheduled time-frame. That's the rule.

Therefore, it is imperative you work with someone who knows what

they are doing! CD’s can not be used as an investment vehicle for

a 72(t) distribution.

Not all (Financial Advisors, CPA’s, Attorney’s or otherwise) know

about this little known  72(t) IRS rule. Also, NOT ALL companies know

how to do a 72(t), or how to set it up properly, or even have the 

mechanical or electronic means available, to do such distributions! 

Very few fixed annuities will work (but some will) because most of

them do not allow withdrawals greater than the earnings growth. 

Because most IRA owners want to withdraw more than the current

growth rate currently offered by some fixed annuities.  I can provide 

you examples of the few that will work effectively. Just ask and I

can e-mail that information  to you. Some Fixed and/or Indexed

annuities work especially well if you’re afraid of losing 

all your retirement money! Which MANY have done in recent years.

I have effectively set-up 72t’s for income withdrawals prior to

age 59 1/2 MANY TIMES  throughout the years and it works perfectly,

if done correctly.  It is completely legal and ANYONE can use it! 

The most commonly used investment vehicles for a 72(t) are variable 

annuities. One of the main reasons, is the fact that variable

annuities allow you to actively invest your money so it can continue

to grow, at the same time you are pulling an income stream 

from it.  Fixed accounts, stock portfolios, CD’s and MOST fixed

annuities, are often not the most ideal for doing a 72(t). The reason

being, as stated previously, that the amount desired to be withdrawn

from a 72(t) often does not adequately match the amount 

of growth or offer the appropriate amount to be withdrawn. Many

companies and many advisors, simply do not know HOW to properly

do a 72(t). Work with someone who is extremely knowledgeable in

this very special area.

Would you like an ESTIMATE of what YOUR; 401k, 403(b), 457 plan

or IRA might produce for an income, using a 72(t) for early withdrawals

to eliminate the IRS penalty. Simply provide me: your age, your

beneficiaries age, the amount of money in your retirement 

plan and I will prepare an income estimate for you.

FREE! No obligation!