Substantially equal payments were calculated on an individual at the age of 43. Due to the decline in the market, the individual's balance has been reduced considerably. Based on the amounts of the distributions, the balance may be depleted prior to his attaining age 59 1/2.

Will the individual incur the 10% penalty on the distributions since he may not yet be 59 1/2, or is there an alternative method to adjust the distributable amount in order for it to continue beyond the required age of 59 1/2?

There are people who have requested rulings from the IRS that would grant permission to reduce the withdrawals to reflect the decline in account balance. No official answer on these requests yet.

I did hear unofficially that if one ran out of money, the IRS would not invoke the penalty. (How kind of them).