Mutual Fund Company Recommendations

L1: Mutual Fund Company Recommendations
Does anyone have an positive and/or negative comments regarding any Mutual Fund companies (Vanguard, T Rowe Price, American Century, Janus, etc) inreference to 72T withdrawls? Any quirks/issues that were discovered after starting 72T? Would you use same/different company again after your experiences?
Thanks
2007-07-01 17:55, By: usagolfho, IP: [69.84.97.119]

L2: Mutual Fund Company RecommendationsI started a 72t in March 2006 thru Schwab. They took my written plan and enacted it for 2 pmnts per calendar year, (March and Sept) and I got a code “2” 1099-R for 2006, which is good news. I started a 2nd 72t thru Vanguard in May 2007, and their website warned me that they only code the 1099-R”s with code 1 (early no exception) so I know that I have to file the form (is it 5498??) with my 2007 taxes for that one. I asked Vanguard in writing with their forms.. to issue me the first check on May5th for5 months worth of (2007) payments, then start monthly payments on June 5th, and it all worked out once I discussed it over the phone with them–they called me to go over my request. I got five months worth in May and then the single month amount in June, and expect the single month payment to continue without a problem. I”d have to say both worked well for me. KEN2007-07-01 20:18, By: Ken, IP: [75.67.65.254]

L2: Mutual Fund Company RecommendationsHello usagofho:
All of the companies you mention as well as a dozen more are all capableof processing SEPP plan withdrawals. However, there are two issues worth discussing:
1. each company does take a different view on how to properly code the 1099R”s. This has been made a fairly big issue (including here at this website). My opinion — forget it. Just plan on keeping good docmentation and filing Form 5329 with your tax return each year.
2. more importantly, each of these trustees has fairly sophisticated computer distribution processing systems; often too sophisticated for your own good. My opinion — forget it. Instead process each of your distributions manually and in writing to the trustee — do not trust the trustee”s computer system to make the correct annual withdrawals for you.
TheBadger
wjstecker@wispertel.net

2007-07-02 07:25, By: TheBadger, IP: [72.42.67.42]

L2: Mutual Fund Company RecommendationsAs with investment performance, past processing performance is not a guarantee for the future. At the other end, you are dealing with input personnel and computer systems, both of which are subject to change, “improvements”, etc. There are also timing issues to be concerned about if you are doing less than a full year”s withdrawal in the short first year. Make sure that the total amount to be withdrawn the first short year is correct based upon the date on which the first withdrawal is processed by them, regardless of when you sent it in and thought it would start.
For all of these reasons, that is why most of us recommend doing it yourself manually, at least for the short first year, and the last short year. The full calendar years in between are less problematical.2007-07-02 07:44, By: dlzallestaxes, IP: [141.151.86.22]

L2: Mutual Fund Company RecommendationsHello, usagolfho:
I retired in October 2004, rolledmy 401k plan balance into a TIRA at Vanguard in February 2005, and started taking 72t payments in March 2005. Vanguard has been very good for all this with the exception of their 1099-R coding policy. They insist on using a box 7 code of “1, early withdrawal, no known exception”, in spite of the fact that I had to fill out a 6-7 page form for starting my SEPP withdrawal program and signed that all of the info there was correct. I thought that they should code the 1099-R as a “2” and requested that they issue a corrected 1099-R but they refused to do so. At least this is easily corrected via filing a form 5329, which explains to the IRS that I do have a 72t / SEPP plan in progress. Why the IRS should take my word for this in place of the guys who control my IRA is beyond my understanding but apparently, they do.
In any case,I would say that my Vanguard experience was positive and would recommend them to others in spite of their 1099-R coding policy. It would simplify my tax filing not to have to include a form 5329 but it”s not that big a deal. I use the Tax Cut software to prepare my return and it kicks out this form after I give it all the info it needs.
Ed2007-07-02 14:16, By: Ed_B, IP: [67.170.159.37]

L2: Mutual Fund Company RecommendationsAn increasing number, if not the vast majority, of mutual fund companies and brokers, are all coding the 1099-Rs “the easy way” with a code 1 because they do not want the responsibility for determining if you really are completely qualified under the SEPP 72-T rules, and haven”t done anything improper to bust it by activity at another broker or mutual fund. I think that all of them may be coding the 1099-R distributions this way with a code 1 starting for 2007. The FINAL YEAR distributions are a whole other problem that I”ve elevated to the IRS in DC to require TWO 1099-Rs to be issued for the final year, with a code 2 for SEPP 72-T payments before 59 1/2 or 5 years, and code 7 afterwards for “normal distributions” not involved under SEPP 72-T regulations..2007-07-02 17:07, By: dlzallestaxes, IP: [141.151.86.22]

L2: Mutual Fund Company RecommendationsGuys Thank you all for your feedback.
I was a little concerened by the 1099 “1” code but will just do the additional IRS form. Also Badger i agree with doing my own simple manual calculations to keep the pirahanas from attacking based on a honest mistake or technicality.2007-07-04 16:35, By: usagolfho, IP: [69.84.97.119]

L2: Mutual Fund Company RecommendationsHere”s a different approach for controlling the distributions, especially if you are taking the same amount each month, quarter, etc., and not doing “recalculation” each year.
1. Set up automatic distributions for the amount and frequency of your plan using the custodian”s computer system. The reason for my position is that computers are not subject to Alzheimer”s or “round-to-it” syndrom. (You know, “Oh crap, I just didn”t get “round-to-it” and it”s too late for this year”s distribution.”) People are subject to these short falls.
2. Monitor the activity very closely and immediately bring any errors to the attention of the custodian for correction. This includes having someonein addition toyour spouse, like a child or advisor, knowing about your plan so they can help with the monitoring aspect.
I have found that once the system is set up it works quite fine becausethe computerwill carry out repetitive commands very consistently and as directed. So if you set up an automatic distribution plan and the first check has the wrong amount or went to the wrong bank or you got a check instead of it going to your bank, etc., then you can get the problem corrected early. Once it”s working correctly then things seem to hum along OK.
Monitor. Monitor. Monitor.
Jim2007-07-05 07:29, By: Jim, IP: [24.252.195.14]

L2: Mutual Fund Company RecommendationsThere is absolutely no qustion that you (the taxpayer) are the ultimate person responsible to make sure that the correct annual distributions are made. As a result, I counsel that people NOT RELY UPON THE AUTOMATED TRUSTEE DISTRIBUTION SYSTEMS. Thereis a simple reason for this — these systems regularly make mistakes; e.g. your dustribution is supposed to $5,000 for July butfor whaterver reasonthere is only $4,000 free cash on the date the distribution is supposed to occur. Guess what; the computer system distributes $4,000 and does not tell you; further, the computer system does not try to catch you up as free cash becomes available.
As a result, I recommend that everyone take manual control over their SEPP plan as follows: create three accounts; 1. Your SEPP IRA; 2. A taxable brokerage account at the same institution; 3. your monthly regular living checking account (note that 2 of 3 accounts already exist). Then once per year (at most once per quarter) manually distribute the $60,000 (in my example) from the SEPP IRA to the brokerage account. Let the brokerage account earn regular taxable or tax free interest as suits your needs. Then, once a month, you write the check on the regular brokerage account to your checking account for living needs of $5,000. This methodolgy is not complex and absolutely insures that the SEPP plan executes correctly.
TheBadger
wjstecker@wispertel.net

2007-07-05 07:53, By: TheBadger, IP: [72.42.66.10]

L2: Mutual Fund Company RecommendationsGood morning Bill:
Your “3-account system” is good for taking lump-sum, annual distributions. However, I prefer to keep the money invested as long as possible for growth before making the distributions. That”s why I advocate monthly or quarterly distributions.
Since the original question dealt with mutual fund families and not using a brokerage environment, then I would still recommend the automated / monitored system. I will assume the poster doesn”t plan to use an advisor or CPA and plans to “DIY” so minitoring will be a full-time issue. In this situation he / she will still be subject to Alzheimer”s and the “round-to-it” syndrome.
The problem of not having enough funds in the account is real. However, my current custodian, National Financial Services, deals with this problem by going to the lowest value fund to liquidate shares to make up any shortfall for distributions. I guess they had enough complaintsso theymade some programming changes. Maybe some of the other custodians will catch on quickly.
Jim2007-07-05 08:19, By: Jim, IP: [24.252.195.14]

L2: Mutual Fund Company RecommendationsRegardless of whether you use an automated distribution program or straight manual DIY distributions, neither of which are absolutely fool proof, I recommend an early December total review of the year”s distributions to date so that there is time to make any corrections prior to year end.
With respect to automated distributions, the reliability can evaporate if you are making changes to the account of any type that requires the custodian to go into the system for any reason. An example would be a change of banks receiving an ACH transfer, perhaps even something seemingly unrelated such as a change of beneficiary. Strange things can happen when people key in changes to your accounts. And with respect to the manual environment, you might be making a mistake or get out of sync with the 1099R cycle which is based on the actual date of distribution. In either of these scenarios, distributions should not be ordered anywhere near the end of the year, as they might not get done in time or could be incorrect with no time to react. That advice has been repeated continously from several posters on this site. Bottom line, use maximun preventive maintenance to avert a busted 72t.2007-07-05 11:51, By: Alan S., IP: [24.116.66.98]