Underpayment penalty vs. early withdrawal penalty


D

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?

Thanks.
 
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