Well, I am not in a place where I'm able to take early distributions yet, but I came across a nifty way to take distributions without the 10% penalty before age 59 1/2 if you are so inclined.
Note: PLEASE do not do this simply to get at some money early!! But, if you are in a sweet spot and have a couple million in an IRA and still have a few years until 59.5, read on!
72(t) Distributions
First, please note that you still get taxed at your marginal rate on the amount of the distribution. You are only saving yourself the 10% early withdrawal penalty!
Second, you have three methods of determining how much you withdraw -- you cannot just take any old amount.
Third, once you start taking these withdrawals, you have to continue for either five years or until you reach age 59 1/2 -- whichever in LONGER.
The three methods are:
1) Balance divided by your life expectancy.
2) Balance divided by an annuity factor.
3) Balance amortized across your life expectancy with an pre-specified growth rate.
Method 1 results in the smallest annual payment. 2 and 3 seem to usually come pretty close to the same amount, and they can be more than half again the amount from #1.
As always, consult a tax adviser and consider reading the tax code yourself (you were trying to go to sleep,right?). There is a calculator here (http://www.dinkytown.net/java/Retire72T.html) that allows you to see how much you could take now. Have fun!
Regards,
Trond
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