Does a disability allow to alter 72t payments?
Disability can be a life-altering event, and it often brings about significant changes in one’s financial situation. For individuals who have been making 72t payments, a disability can raise questions about the possibility of altering these payments. In this article, we will explore whether a disability allows for altering 72t payments and the implications it may have on your retirement savings.
Understanding 72t Payments
Before delving into the question of altering 72t payments due to a disability, it is essential to understand what 72t payments are. The 72t rule, also known as the Substantially Equal Periodic Payment (SEPP) rule, allows individuals aged 59½ or older to withdraw money from their retirement accounts without incurring the 10% early withdrawal penalty. These payments are designed to provide a steady stream of income during retirement.
Eligibility for Altering 72t Payments
In certain circumstances, a disability may allow an individual to alter their 72t payments. According to the IRS, if an individual becomes disabled, they may be eligible to suspend their 72t payments. To qualify for this alteration, the individual must provide proof of their disability, such as a letter from a doctor or a disability certificate.
Impact on Retirement Savings
When altering 72t payments due to a disability, it is crucial to consider the impact on your retirement savings. Suspending your payments may provide you with immediate financial relief, but it is essential to understand that you may not be able to resume the payments once suspended. This means that you may miss out on the potential growth of your retirement savings during the suspension period.
Options for Altering 72t Payments
If you are eligible to alter your 72t payments due to a disability, you have a few options to consider:
1. Suspending payments: As mentioned earlier, you can suspend your 72t payments for a period of time, typically until you recover from your disability.
2. Changing the payment schedule: You may also be eligible to change the payment schedule to better align with your financial needs during your disability.
3. Terminating the 72t plan: In some cases, you may choose to terminate the 72t plan altogether, but this could result in the 10% early withdrawal penalty on any funds withdrawn before age 59½.
Seek Professional Advice
Navigating the complexities of altering 72t payments due to a disability can be challenging. It is highly recommended to consult with a financial advisor or tax professional to understand the best course of action for your specific situation. They can help you make informed decisions that will ensure your financial well-being during this challenging time.
In conclusion, a disability can indeed allow for altering 72t payments. However, it is crucial to carefully consider the implications and seek professional advice to make the best decisions for your retirement savings.
