Series6 Real Exam Prep DEMO

Question 5: Marge is 57 and wants to retire early. Since she is not yet eligible for social security, she wants
to begin
tapping a variable annuity to which she has been contributing for the last 20 years. Which of the
following
statements regarding her withdrawals is true?
A. There is no way that Marge can begin making withdrawals without facing a 10% penalty for early
withdrawal unless she is disabled or needs the money for medical expenses.
B. Marge can begin her withdrawals tax-free and without penalty under IRS rule 72(t) as long as she
does
so following the specific guidelines until she turns 59 1/2 , at which point she will no longer have to
follow
the specific guidelines.
C. Marge can begin her withdrawals tax-free and without penalty under IRS rule 72(t) as long as she
does
so following the specific guidelines for a period of five years.
D. Marge can begin her withdrawals without penalty under IRS rule 72(t) as long as she does so
following
the specific guidelines for a period of five years; however, the withdrawals will be subject to taxation.
Correct Answer: D
Explanation: Since Marge is only 57, she can begin her withdrawals without penalty under IRS rule
72(t)
as long as she does so following the specific guidelines for a period of 5 years, but the withdrawals
will be
subject to taxation. Once she starts the program outlined in rule 72(t), she must remain on it for at
least
five years or until she turns 59 1/2 , whichever comes last. This means that although she's already 57
and
will be turning 59 1/2 in 2 1/2 years, she will have to continue to follow the guidelines for a full five
years, or
until she turns 62, in this case.