10 Questions to Ask a 72(t) Consultant Before Hiring
Before hiring a 72(t) consultant to design your SEPP plan, it's essential to evaluate their expertise and approach. The wrong consultant — or a plan designed incorrectly — can trigger the 10% IRS penalty retroactively on all prior distributions. Here are 10 essential questions to ask before you hire.
1. How Many 72(t) SEPP Plans Have You Designed?
Experience matters enormously in 72(t) planning. A consultant who has designed dozens or hundreds of SEPP plans will have encountered edge cases, IRS questions, and implementation challenges that a generalist advisor hasn't. Ask for a specific number and ask about the types of accounts and situations they've handled.
2. Can You Explain All Three Calculation Methods?
The IRS approves three methods for calculating 72(t) distributions: the RMD method, the Fixed Amortization method, and the Fixed Annuitization method. A qualified consultant should be able to explain all three clearly, calculate each for your specific situation, and explain the trade-offs. If they can't, look elsewhere.
3. What Happens If I Need to Modify My Plan?
The modification rules for 72(t) SEPP plans are strict — unauthorized modifications trigger the 10% penalty retroactively. Ask your consultant specifically what modifications are allowed, what happens if your account balance changes significantly, and how they handle the transition when the plan ends.
4. Are You Registered with FINRA?
Ask for their FINRA BrokerCheck registration number and verify it independently at brokercheck.finra.org. This is a basic but essential step in verifying a financial professional's credentials and checking for any disciplinary history.
5. What Are Your Fees?
Understand exactly what you'll pay and when. Some consultants charge a flat fee for plan design, others charge ongoing management fees. Make sure you understand the full cost before committing. Be wary of consultants who are vague about fees or who charge excessive amounts for what is essentially a calculation and documentation service.
6-10. Additional Questions
Also ask: How do you handle the transition from SEPP to regular distributions at age 59½? What documentation do you provide? How do you support clients if they're audited? What's your process for monitoring compliance? Can you provide references from clients who have completed SEPP plans? A qualified 72(t) consultant will have confident, clear answers to all of these questions.
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