Q. I am unemployed and need money. Should I take a Rule 72(t) distribution from my IRA?
A. The answer is you should try to avoid this route unless you have exhausted all the other options.
The rule 72(t) allows "substantially equal periodic payments" from your retirement fund without the early withdrawal 10% penalty (you still have to pay the income tax, though).
There is a caveat - you have to take money on a set schedule either for 5 years or till age 59.5, whichever is longer. If you are unemployed, your will likely pay less income tax for the distribution, no wonder this option is attractive for some early retirees. However, once you are employed again, you still have to take the distribution, it will push up your tax. And the worst of all, you could deplete your retirement egg ahead of its normal time.
A. The answer is you should try to avoid this route unless you have exhausted all the other options.
The rule 72(t) allows "substantially equal periodic payments" from your retirement fund without the early withdrawal 10% penalty (you still have to pay the income tax, though).
There is a caveat - you have to take money on a set schedule either for 5 years or till age 59.5, whichever is longer. If you are unemployed, your will likely pay less income tax for the distribution, no wonder this option is attractive for some early retirees. However, once you are employed again, you still have to take the distribution, it will push up your tax. And the worst of all, you could deplete your retirement egg ahead of its normal time.
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