With increased layoffs from Corporations and unemployment at historical levels, more and more of the unemployed are forced to withdraw from their IRAs and 401ks.
If you are below 59 1/2 years old and you take money out of your IRA's or 401k's, the IRS will penalize you 10%.
In addition, you must pay taxes on the distribution.
Avoid the 10% early withdraw penalty by following the IRS' rule called a 72T.
This little rule could save you thousands of dollars in penalty costs.
You don't want to just take out your retirement money and pay the penalty taxes, if you can avoid it.
You might consider something called a 72T.
This rule allows for you to take equal distribution for 5 years and avoid the 10% penalty tax.
Here is the basics of how it works.
Let's say you have $100,000 in a retirement account and you are 50 years of age, you are unemployed and need to access your IRA account until you can find a new job.
You need $20,000 to get you by to pay your mortgage and the food bills.
Here is what you do...
you take $4,000 per year equally over a 5 year period.
The IRS allows for this provision in the tax code, it's called a 72T.
By taking 5 equal payments over 5 years you will avoid the IRS' 10% early withdraw penalty.
You will still have to pay income tax on the income, but you will not have to pay the penalty.
With unemployment only continuing to increase and more people being forced to tap into their retirement funds for temporary income use the 72T IRS rules and save yourself from the IRS.