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Writing for Morningstar, Natalie Choate Discusses How to Effectively Take Early IRA Distributions Without Penalty

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10.19.2018 | Article

Natalie Choate, a member of the firm’s Private Client Department, authored an article that analyzes how IRA distributions made to IRA owners before they reach age 59.5 are generally subject to an extra 10% penalty in addition to regular income tax in Morningstar. In the article, “Effectively Taking Early IRA Distributions Without Penalty,” Natalie shares examples in which clients would seek a series of substantially equal payments (SOSEPP). She elaborates that IRS rules offer three methods of designing the SOSEPP (annuitization, amortization, minimum distribution), a choice of interest rates (anything up to 120% of the applicable federal rate), and a choice of life-expectancies over which the series payments will be computed (single, joint with beneficiary, or Uniform Table). To be able to withdraw the largest possible payments, clients should use a single life expectancy, because a joint life payout cannot produce larger payments than a single life payout. And the highest permitted interest rate, because that produces larger payments than a lower rate. 

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