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L1: 401 ROLLOVER TO IRAHello! Looking for some experiences with what investment groups support IRA’s that are set-up for minimal problems for the 72T distributions? In other words maybe, accessing these funds without any other penalties or stipulations. Thanks for your answers in advance. Great site!2009-03-09 01:47, By: Bill D., IP: []
Hello, Bill:

I’ve read your question a number of times but still cannot figure out exactly what it is that you are asking. Let me ramble a bit and see if my response is anywhere near the mark.

I have a SEPP that I started in 2005. I rolled my 401k plan money into this IRA in early 2005 and have it with Vanguard. Vanguard is a good place to invest retirement money because their fees are low and they have a good selection of mutual funds. Vanguard, like many other custodians, does not recognize that their clients have SEPPs, so always mark their 1099-Rs with a code of “1” in box 7. This then requires that their clients file form 5329 to claim the exemption from the 10% IRA early withdrawal penalty tax. Other than this one point, I have been satisfied with them as a custodian.

It is the inherent nature of a SEPP/ 72t plan that we cannot get access to this money other than for the exactly calculated amount of the plan. This is calculated in one of three IRS approved methods. Once we select a method, do the calculation, and begin receiving the regular distributions, we cannot change the amount without busting the SEPP and having to pay taxes and penalties on all of the money distributed from the account up to age 59.5. There is a one time exception to this where SEPP owners can convert to the RMD method of calculation without penalty. This is often done to prevent a SEPP account from being depleted too quickly and usually results in a reduction in payment by about 1/2. Anyone receiving $30k per year from their SEPP, for example, via the amortization or annuitization calculation methods would see their payment reduced to about $15k per year via the RMD method.

As to minimal problems, well… that is pretty much up to the individual unless you hire a financial advisor with good experience in retirement issues in general and 72t / SEPP plans in particular. It is possible that some custodians are more helpful than others when setting up a SEPP / 72t plan. Some may even have a service that helps set up and implement the plan for a fee. You will have to check with several possible custodians to see what they offer. Vanguard has a lot of useful information along these lines but I am unaware ofany help that they may offer in setting up these accounts.2009-03-09 16:54, By: Ed_B, IP: []

L2: 401 ROLLOVER TO IRAThanks Ed. That is what I was looking for…2009-03-18 23:04, By: Bill D, IP: []

L3: 401 ROLLOVER TO IRAYou’re welcome, Bill. Glad to have helped.
2009-03-19 03:39, By: Ed_B, IP: []