http://www.gcbaonline.com/retirement/understanding-irs-72t-withdraws-rule-calculator) helps explain how.
The 72t rule allows for money to be withdrawn ahead of time from a retirement account in five SEPPs, or Substantially Equal Periodic Payments over a period of five years, or until the recipient reaches fifty nine and a half years of age. The rule also includes multiple methods of calculating the distribution of funds over such a period (https://docs.google.com/document/d/1SHufjXo4jrh-fEkVG1bK7HfK-HAkBqtGR7eXJa6Igmg/edit).
These methods have advantages and disadvantages which make them an ideal fit for specific circumstances. Minimum Distribution Method enables users to unlock the smallest possible amounts, Amortization allows for fixed annual payments drawing out the largest amounts, where Annuitization allows for users to receive steady yearly pay outs.
A spokesperson for GCBA explained, “We understand that the logic behind this rule and its execution can be difficult to grasp, so we have done our utmost to present the process in easy to read plain English and describe using real examples the direct comparison between the distribution methods in terms of what it will mean for the user and the money they can get access to. We believe rule 72t is an amazing resource for those looking to unlock their wealth, and we also advise on finding the right financial representative to ensure navigating this minefield of red tape is as quick and painless as possible.”
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