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Reply to "Anyone else dealing with this issue of "gap years" before retirement? "
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[quote=Anonymous][quote=Anonymous]This is a non-issue, but I see this problem here every so often. The key is Rule 72(t). Just google/AI it. It’s a section of the tax code that allows you to withdraw retirement money prior to 59.5 without paying the 10% penalty. However, there are stipulations, which are that you must draw the same amount of money each year for at least five years or until you’re 59.5, whichever is longer. Basically, it needs to be an annuity-type withdrawal. We setup a short-term, fixed-period annuity that pays us a fixed amount monthly, earns 5% interest, and ends at 59.5. [b]Separately, there are lots of other ways to use retirement funds before 59.5 and not incur a penalty. For example, you can pay college costs. We did that instead of a 529 plan. [/b][/quote] I thought there was a 10% penalty for using it this way. How did you do it without the penalty? [/quote]
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