QUESTION: I wanted to follow-up with you about the early withdrawal plan options from my solo 401k that I think you referred to as 72T.
If you can, please let me know what the various options are, including what IRS withholding payments are required?
Thanks again for your help!
EG in California
ANSWER: Unfortunately, the IRS 72t Substantially Equal Periodic Payment Rules do not permit distributions from qualified plans such as a Solo 401k until the participant separates from service, which in the case of a self-employed person means not until the self-employed business sponsoring the solo 401k is shut down.
Here is the language straight from the IRS website.
“If these distributions are from a qualified plan, not an IRA, you must separate from service with the employer maintaining the plan before the payments begin for this exception to apply.”
And here is the IRS website containing the above.
To learn more about the distribution rules applicable to a Solo 401k plan click here.