Peter Keller

Peter Keller is a Senior Financial Advisor with over 22 years of experience in estate, investment, and tax planning strategies. Peter is committed to providing clients with unbiased, comprehensive, and holistic solutions to their financial planning needs. Prior to joining Pure Financial Advisors, Peter worked for a large Broker-Dealer in the Financial Planning Group where [...]

Peter Keller, CFP® for Pure Financial Advisors, shares whether someone can access their retirement funds before age 59 1/2 without the 10% penalty.


“Hi I’m Peter Keller and I’m a Certified Financial Planner™ with Pure Financial Advisors and welcome to your question of the week.

The question of the week this week was ‘Do I have access to my retirement funds before age 59 1/2 without a 10% penalty?’

The answer to the question is yes you can. You can do what is called a substantial and equal periodic payment. Technically it’s called 72t distribution calculation.

What that’s going to let you do is before age 59 1/2, create an income stream until retirement and it has to be the longer of 5 years or until you reach 59 1/2.

So if you’re 56, you’re going to have to go until your 61 with your periodic payments as the minimum duration.

So when you’re doing your 72t distribution calculation, you have three methods by which you can do a substantial equal periodic payment.

The first method is through just a regular required minimum distribution. You will take your account value as of December 31 of your IRA and you will divide it by your life expectancy using one of the three life expectancy tables provided by the IRS.

The second method is to do an amortization. You can do the amortization with the same methodology where you will take the life expectancy tables, divide that into the December 31 IRA account value. Then you will have an income stream that is the same amount year after year where as in the first method it will recalculate and you will have a different dollar amount each year. With the second method, amortization – it’s the fixed amount throughout retirement.

The third method, you can do an annuitization. It’s similar to the amortization schedule where it’s the same periodic payment for the longer of 5 years or 59 1/2. Now if you take out more from your retirement account than just the periodic payment, then that blows the whole income stream up the 72T calculation and you’ll have adverse consequences.

I’m Peter Keller and that was Question of the Week.”