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Annual to monthly withdrawal / partial year  


Eric
Posts: 1
 Eric
(@ericfalter)
Active Member
Joined: 1 month ago

I plan to retire this year and would like to understand if I can take an annual withdrawal this year in July and then convert to monthly in January 2021?   Also, regarding this year's withdrawal, do I have to pro rate it, or can I take the entire year's allowable amount?  Thanks!! 

PS. no covid exception applies to my situation to allow withdrawal

1 Reply
dlzallestaxes@msn.com
Posts: 50
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 1 year ago

Yes, you have various options. First, you can take either the full annual distribution, or you can take a prorated amount based upon the month you start. ( July would be 6/12 = 50%).

Second, you can change the frequency of your distributions every year, or even within any year, but must take the exact same total amount each year, other than the first or last year.

Third, the COVID exceptions do not apply to SEPP 72-T plans, if you already had one. I agree that you cannot use that exception for under 59 1/2 if you were not affected by the pandemic.

Fourth, going back to the annual vs. prorated aspect, that should be a combination of a cash needs approach and a taxable income/tax bracket consideration for you to discuss with a tax professional to do a 2020 projection.

 

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