Sometimes you need to withdraw from your IRA plan for expenses that arise. Though it is strongly recommended that you don’t, there are exceptions to the early withdrawal penalty. In the case of IRAs, there is a 10% penalty if you take distributions before the age of 59 1/2. Most exceptions are not planned such as disability or losing your job and needing to pay for insurance.
Bob Carlson of investingdaily.com says, “The exception that provides the most planning opportunities is for a “series of substantially equal annual distributions.” This sometimes is referred to as the SOSEPP exception (for “series of substantially equal periodic payments”). The SOSEPP exception primarily applies to IRAs. It applies to qualified employer plans only if the employee has separated from service of the employer.
To qualify for the exception, distributions from the IRA must be taken at least annually. The payments must be scheduled to last for the account owner’s life expectancy or the joint life expectancy of the owner and a beneficiary.
The distributions must continue until the later of either five years or when the owner reaches age 59½. For example, if substantially equal annual distributions begin at age 57, they must last at least five years to avoid the penalty. If the payments begin at age 50, they must continue at least until the owner reaches age 59½. After payments have continued for the required minimum period, they can be stopped without triggering the penalty.”
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