As baby boomers transit middle age, many are retiring early—and in many cases, they're using 72(t) procedures. It's easy to make costly mistakes—and advisors need to be on their guard, according to a new white paper, "Understanding 72(t) Distribution Planning," by Securities America in Nebraska.

All withdrawals made before the client is 59½ must follow the procedures stated in section 72(t) of the Internal Revenue Code, or a 10% penalty may be applied to the withdrawn amount. The procedures include specific calculations to determine how much can be taken out, known as "equal periodic payments without penalty," as stated in the white paper.

Many planners advise their clients against early withdrawals, especially if they plan to use the money for immediate financial needs, since that could mean clients' portfolios are no longer able to provide them with a sustainable lifetime retirement income.

Early withdrawals became an issue for advisors during the mid to late 1990s, when many clients decided to retire early based on the tremendous growth of the equity markets—only to find the market's success subsiding in the following decade. The white paper urges advisors to take a close look at this process once again, as boomers, flush with equity profits, may be retiring into a volatile market.