I’m one of those persons that gets bugged when I read something that sounds definitive from a purported authority that is incorrect or incomplete. Today, I came across such a glaring omission in the about.com article Eight Ways to Avoid the 10% Early Withdrawal Fee on Your IRA . Now, it doesn’t say “The Eight Best Ways” or “The Only Eight Ways” but it is seriously lacking in mentioning the ninth way.

The “Ninth Way”, shall we call it, is well known by its IRS code the 72t Exception. There are websites devoted just to this exception. Googling “72t exception” gave me almost 14000 hits. It is an exception because it is a way to avoid the 10% penalty for early withdrawal (i.e. before age 59 1/2). The exception involves taking “substantially equal periodic payments” and is sometimes called a [SEPP] Plan. The payments must be taken at least annually — from the retirement plan for at least five years or until age 59½, whichever is longer. Once one begins taking these early payments, they must continue until they reach the age of 59 1/2. Further, they must be taken for a minimum of 5 years so a 57 year old would need to take them until age 62, while a 50 year old would be required to continue until 59 1/2. Fidelity has a good description here.