But the benefits are huge because you have total flexibility and can tap the money whenever you need it rather than be locked in to a 72t distribution schedule.

Thanks for the comment and forcing me to back up my post! Nice job. I need that once in a while =)

The lump sum distribution could be a requirement found in the Summary Plan Discription from your employer – they might put their own restrictions on it, but the IRS does not.

This is from Publication 17 on the IRS website:

Additional exceptions for qualified retirement plans. The tax does not apply to distributions that are:

From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), ”

It puts no stipulation whatsoever on how the money is withdrawn. You can take as much, as little or even periodic withdrawals from an IRS standpoint.

Also, Ed Slott – known as the IRA Guru – says this at his website http://irahelp.com

“they can be stopped anytime as far as the IRS is concerned. There are no tax code rules. However, the plan might have some stipulation that the monthly withdrawals must be taken for a certain time after you start them. That would be a plan requirement and have nothing to do with any IRS requirement.”

Basically, you’ll want to check with your employer to make sure they allow this, but most of the time they do. The IRS doesn’t care how you take it.