Underpayment penalty vs. early withdrawal penalty


Dave Rudisill

We retired early and are living off our IRAs. Since we are
not yet 59.5 years old, every nickel we withdraw is subject
to ordinary income tax plus a 10% penalty. (A 72(t) plan did
not work for us.)

As of August 25 this year, I will be 59.5 years old.

As of the fourth quarter of 2005, the underpayment penalty
rate was 7%. Wouldn't it make sense for me to simply NOT
make estimated tax payments until after I turn 59.5?
Wouldn't the underpayment penalty be substantially less than
the 10% early withdrawal penalty?

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