Most Americans think that age 60 is the proper age to collect retirement benefits. The truth is you must be at least age 62 years old to collect Social Security benefits (at a discounted rate). But, you can make penalty free withdrawals from your qualified retirement plan(s). And, U.S. military reserve and National Guard members are also eligible for early retirement pay.
If a single life expectancy table is utilized for the required annual distributions it must be utilized in all subsequent distribution years. Alternatively, if the joint life and last survivor table is utilized, the account survivor must be the actual beneficiary of the account owner. If there is more than one beneficiary, the identity and age of the beneficiary used for purposes of each of the methods is determined under the rules for determining the designated beneficiary for purposes of 401(a)(9). The beneficiary is determined for a year as of January 1 of the year while the interest rate that may be used is any interest rate that is not more than 120 percent of the federal mid-term rate (determined in accordance with 1274(d) for either of the two months immediately preceding the month in which the distribution begins).
One Time Conversion or Early Termination:
IRS Revenue Ruling 2002-62 allows you to may make a one-time penalty free change from one of the two fixed withdrawal methods to the minimum distribution method. However, a subsequent change to the withdrawal method will be treated as a modification under IRC 72(t) (4) and will trigger the 10 percent early withdrawal penalty. Alternatively, if you elect to terminate the series of substantially equal periodic payments the 10 percent early withdrawal penalty will apply to all distributions to date, plus interest from the date of the distribution to the date the individual discontinued the program.
Additional Exceptions to the 10 Percent Penalty:
The following retirement plan early withdrawal scenarios will also be exempt from the 10 percent early withdrawal penalty: (i) distributions made to a beneficiary (or to the estate of individual) on or after the death of the individual; (ii) distributions attributable to disability; (iii) distributions made after separation from service after attainment of age 55 (excluding distributions from IRAs); (iv) distributions from an IRA to an unemployed individual for health insurance premiums; (v) $10,000 "first-time homebuyer" early withdrawal from an IRA; (vi) early withdrawal of IRA funds to pay higher education expenses; and (vii) qualified reservist distributions for individuals called to active duty.