Substantially Equal Periodic Payment Rules

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!

Best Regards,

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.

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments


To learn more about the distribution rules applicable to a Solo 401k plan click here.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

MENU