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There is one other way to get money out of your retirement accounts and avoid that 10 percent penalty if you are not the permissible age or if your money is in an IRA or IRA rollover. You can do this by using a technique called substantially equal periodic payments (SEPP). Simply put, you have to take out a certain amount of money every single year until you are 59.9 or for five years, whichever period is longer.
So if you are 57 and you start to take money out of your IRA account under SEPP, you will have to do so until you are 62. If you’re 52 when you start, you’ll have to continue withdrawing the money until you’re 59’/2—again the rule is whichever time period is longer.
The amount you can withdraw is calculated by one of three methods; the method you choose will determine the actual dollar amount you must take out yearly. This exact predetermined amount must be withdrawn every year for five years or when you reach S9Vz, whichever is longer. Very few people know about this loophole, IRS code 72(t)(2)(A)(IV), but it’s there if you need it. Make sure you deal with a financial adviser, accountant, or brokerage house who is familiar with this law.