IRC 72(t) election strategy is being used by self-directed IRA investors seeking to take IRA distributions prior to age 59 1/2 without penalty
IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) plan solutions introduces the Self-Directed IRA 72(t) election strategy for IRA investors looking to receive IRA distributions prior to the age of 59 1/2 without paying a 10% early distribution penalty. Individual Retirement Accounts (“IRAs”) were intended by the IRS to be long-term savings vehicles to fund your retirement. To discourage early withdrawals, the federal government generally imposes an additional tax of 10% on withdrawals made before age 59 1/2 in addition to any income tax owed on these distributions.
According to Adam Bergman, a partner with the IRA Financial Group, the federal government has recognized that individuals may need to tap their retirement funds before age 591/2 and, in certain limited instances, permit premature withdrawals without the 10% tax penalty, such as (i) Disability or death of the IRA owner, (ii) Payment of certain medical expenses that exceed 7.5% of your Adjusted Gross Income, (iii) Payment of health insurance premiums if you’ve been unemployed for at least 12 weeks, (iv) Payment of qualified higher education expenses, (v) Purchase of a first home (There is a $10,000 lifetime limit on these withdrawals.), (vi)Payment of IRS tax levies, and (vii) Series of Substantially Equal Periodic Payments. The series of “substantially equal periodic payments” are commonly referred to as 72(t) distributions. Under this provision, you can take regular withdrawals from your IRA before age 591/2 under one of three distribution methods approved by the IRS without incurring the 10% early distribution penalty.
The primary advantage of using a Self Directed IRA to make investments is that all income and gains associated with the IRA investment grow tax-deferred. “We have seen a strong interest in self-directed IRA investors under the age of 59 1/2 looking to use the 72(t) election take IRA distributions over a period of years and escape the 10% early distribution penalty.” Stated Mr. Bergman. “The IRC 72(t) election strategy is certainly more beneficial for individuals under the age of 59 1/2 looking to take penalty free self-directed IRA distributions”, added Mr. Bergman.
IRA Financial Group is the market’s leading provider of “checkbook control” Self Directed IRA and Solo 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without tax and for one low flat fee.