The 72(t) Early Distribution calculator helps you explore your options for taking IRA distributions before you reach 59½ without incurring the IRS 10% early distribution penalty. Internal Revenue Code (IRC) Section 72(t)(2)(A)(iv) defines these distributions as Substantially Equal Periodic Payments. The IRS has approved three ways to calculate your distribution amount: annuitization, amortization and required minimum distribution.
You may choose any of the three methods on which to base your distribution amount. To avoid the 10% penalty once you begin distributions, you must continue to take the required distribution using the same method, at least annually, for the longer of five years, or until age 59½. Once distributions begin, if the series of payments is modified in any way, the 10% early distribution penalty will be imposed retroactively beginning with the first year of distribution.
Exception: The five-year rule is waived upon death or disability of the IRA owner. It is also waived for IRA owners who make a one-time change from the amortization or annuitization methods to the required minimum distribution method.
Essentially, 72t is an exception within the IRC (Internal Revenue Code) that allows for early distribution withdrawals from retirement account, without the 10% early withdrawal penalty. It’s legal and utilized by many early retirees each year.
However, it’s very important to understand the requirements and how to file the right paperwork. If you’re in doubt, speaking to a financial professional who is very familiar with the 72t rules is always a great idea. They can help answer any questions and even walk you through the process, confidently and accurately.
In order to execute a 72t rule for your retirement account, the withdrawals need to be distributed as at least five substantially equal periodic payments. Also, these withdrawals must be taken over a minimum of five years, or until you reach 59 ½ years old, whichever is longer. However, your expenditures might not be as low as you think. And you do need to use a 72 (q) calculator to determine that.
The 72t early retirement rule can be a great option when you’re looking to change up your lifestyle before retirement age, maybe something has happened financially and you need access to your retirement account funds. Whatever the case may be, it is a great options when it’s necessary to pull from your account to avoid the 10% early withdrawal fee.
For more early retirement information, please refer our list of free retirement calculators online here, or use the contact form to get in touch. Using a 72 (t) distribution calculator might help but its best that you take inventory of your finances as well. Thank you and best of luck with your financial endeavors.
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 "Required Minimum Distribution Worksheets." 2012. 29 Apr. 2015 <http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Required-Minimum-Distribution-Worksheets>
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