Client Facing Letter: 5 Key Rules for Using the SEPP/72(t) Strategy

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Client Facing Letter: 5 Key Rules for Using the SEPP/72(t) Strategy

Use this client-facing letter to help explain the rules about the substantially equal periodic payment (SEPP) program. Also known as 72(t) payments, this program is used to avoid the 10% additional tax (early distribution penalty) that applies to distributions taken before the IRA owner or plan participant reaches age 59 ½.
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Client Facing Letter: 5 Key Rules for Using the SEPP/72(t) Strategy

Use this client-facing letter to help explain the rules about the substantially equal periodic payment (SEPP) program. Also known as 72(t) payments, this program is used to avoid the 10% additional tax (early distribution penalty) that applies to distributions taken before the IRA owner or plan participant reaches age 59 ½.

Sub-topics covered are:

  1. Do not start 72(t) payments if you already qualify for an exception to the penalty.
  2. Your 72(t) payments must be calculated using an IRS-approved formula.
  3. You must make 72(t) payments at least annually.
  4. You must continue (72(t) payments for the required duration.
  5. No other distributions or additional payments allowed for 72(t) payments accounts.
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