Solutions 4 Financial Independence: 10/09/18

Published: Oct. 9, 2018 at 10:16 AM EDT
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Question: I am 52 and lost my job 6 months ago. I rolled over my 401K plan to an IRA, thinking I would not need the money for several years. I did get a new job, but really need more money on a monthly basis. Can I get access to my IRA money, before I retire?

John Halterman Answer: Well, you can definitely get access to your money, it’s just whether you’re going to pay penalties, and how much you’re going to pay in taxes. You know, being 52, retirement plans were designed to last until age 59 1/2. So, if you’re going to need one-time money, such as $20,000, you’re going to have to pay that as earned income, and pay the 10% penalty. Now, you’re talking a monthly basis, so if you need this money on a monthly basis, there is an IRA rule called 72(t). What 72(t) means is you can take equal payments before the age of 59 1/2, and take those every single month until your age 59 1/2 without having to pay a 10% penalty. There is a key though, you cannot make changes to that distribution, so whatever it is you’re going to take, as a simple example, you take 5% of $500,000, that's $25,000 a year, you will have to take those each and every single year up until 59 1/2. If you change them, the IRS is going to come back, and they are going to penalize you 10% for every distribution you took in the past. So, before you make that decision, make sure you consult an accountant, make sure you do the right thing for yourself.