annual distribution

L1: annual distributioni want to establish my first annual 72t distribution in december 2007, then take out2008 distribution in january, can i do this, or do i have to take each distribution in december?2007-11-28 07:40, By: markgreg, IP: [75.10.73.54]
L2: annual distributionYES. he first year the distribution can be either prorated, or be the entire annual distribution calculated. All other years before the last year, you can take your annual distributions in whatever frequency you want, so long as you take the exact annual total each year. The final year you can take the reciprical part of the prorated amount you may have taken the first year, or you can take a full annual distribution in the final calendar year regardless if you take it before the 59 1/2 – 5-year period limit.2007-11-28 13:30, By: dlzallestaxes, IP: [4.175.9.233]

L2: annual distributionAs indicated above, this plan is entirely in compliance.
However, we have seen more than a few cash flow problems with 72t participants taking their full annual distribution very early in the year. This requires some strong budgetary restraints from early on to be sure that the distribution will last till year end. Granted, the April tax bill will be lower due to taking only one month in 2007, but there is also a need to determine what 2008 taxes will look like and include them in the budget even though they are not overdue until 2009.
If you elect to take the full annual amount as indicated, Irecommendsetting up a conservative budget so that you will not befacing a problem in the fall and the funds are nearly gone. Sounds somewhat elementary, but many people take the amount up front because they actually have up front expenses or bills, and then the problems mount.2007-11-28 16:23, By: Alan S., IP: [24.116.165.60]

L2: annual distributionHello, markgreg:
As an early retiree / 72t participant, I agree wholeheartedly with Alan on this subject. It has been my experience that retirement finances are just as much about cash flow as they are about cash amount.
Most of us have worked for a long time prior to makinga 72tplan and retiring. During those working years, we bacame accustomed to getting paid every 2 weeks or monthly. That steady flow of cash matched up rather well with our bill-paying schedule so never required a lot of thought about our cash flow.
In retirement, however, that schedule may be interrupted by having a lot more time between pay checks than we are used to having. My situation dictated that a quarterly payment schedule would be best, so that is what I have. It is a little different from my former employed monthly payment system but not by a lot. I can easily see where I would have had problems with a semi-annual or annual payment system, though.
One of the nicer aspects of the 72t program is that the IRS does not care what the payment schedule is or whether we change it as long as we take the same accurately calculated amount each year. It”s perfectly fine to take your 1st annual payment in December 2007, for example, and then switch to 1/4 of that amount quarterly or 1/12 of it monthly in 2008 and beyond. As long as the same annual amount is distributed, all should be fine.
Ed2007-12-02 06:57, By: Ed_B, IP: [67.170.159.37]