You may be among those that retire early and want to use your retirement funds. The problem is, though you’ll have to pay the 10% early withdrawal penalty.

Fortunately, there is a way around this. Section 72(t) of the Internal Revenue Code allows taxpayers of any age to take a series of substantially equal periodic payments without a 10% penalty.

The payments must continue for five years or until you reach 59½ years old, whichever period is longer. While you receive the money, you cannot make any changes to the payments. However, you can irrevocably switch one time to the RMD method.

If you do not stay with the plan, or if you modify the payments in any way, you will no longer qualify for the exemption from the 10% penalty. Furthermore, the 10% penalty will be reinstated retroactively, to all prior years.

Each IRA stands on it own, meaning that taking 72(t) distributions from one account has no effect on the others. Therefore, if one IRA will produce more income than is needed, you could have set up a smaller, segregated account to withdraw from. And in the future, if you need more income, you could begin equal distributions from another account as well. This could provide greater flexibility in meeting your immediate and future income requirements.

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