[SueRae]

There are ways to get around the penalty if you are not yet 59 1/2. There’s an IRS rule regarding ‘substantially equal payouts over a period of time’

[Yosemitest]

If it’s not done by Dec 31, 2012, it’s lost (I believe) .
However, I want to talk to a CPA today.

[Yosemitest]

I called and spoke to some tax CPAs.
They said the same thing.

There are two ways to avoid paying the penalty.
1. Apply and receive a "Hardship Distribution" (CPAs said this one is hard to get)
"it must contain specific language defining what constitutes a distribution on account of an "unforeseeable emergency." "

2. Take a "a 72T, “equally substantial distribution” "

Click on the links above for more detailed information.