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How can I avoid penalty tax on retirement plan distributions before age 59-1/2?

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How can I avoid penalty tax on retirement plan distributions before age 59-1/2?

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November 5, 1999 Question: I have been employed with the same company for 28 years. I am 46 years old. I would like information on an IRS rule called 72(t). I would like to retire early, age 50 or 55. I have a profit sharing plan that I fully vested in and a retirement plan under a defined contribution. Answer: Section 72(t) of the Internal Revenue Code imposes a 10% penalty tax on distributions from a qualified plan or IRA before age 59-1/2. There is a popular subsection of 72(t), called Section 72(t)(2)(A)(4), that allows you to take IRA distributions at any age without the 10% penalty as long as they are taken in “substantially equal periodic distributions.” But you must stick with your distribution scheme at least until age 59-1/2 (or 5 years if longer), or face a high recapture tax under 72(t)(4). You can also use this distribution method to avoid the 10% penalty tax on distributions from an employer’s qualified plan, as long as distributions begin after you have terminated employ

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