401K to IRA – then 72t
L1: 401K to IRA – then 72t
I am retiring next month at age 56 and plan to transfer some of my 401K plan money to an existing IRA. The 401K does not contain any company stock or money I have contributed. I will then start a 72t distribution from the IRA.
Is there any timing or other issues I need to watch out for?
2008-01-29 18:36, By: sl, IP: [188.8.131.52]
L2: 401K to IRA – then 72tRead all of the other postings about not rolling over your 401-K to an IRA. You can make withdrawals of any amounts in any frequency at any time from your 401-K if you “separate from service” in the year you become 55 or older. This avoids locking your IRA (or 401-K) funds into a 5-year plan, and eliminates any possibility of “busting” that plan during the 5 years. Once you roll over a 401-K to an IRA, you cannot use this special provision.2008-01-29 20:03, By: dlzallestaxes, IP: [184.108.40.206]
L2: 401K to IRA – then 72tDLZ is correct but there is a big “IF” that you must deal with. You may make random … whenever you need funds …or systematic … like monthly … distributions IF your former employer”s plan allows such distributions. Before you do anything, check with your company”s HR department to determine what the rules are.
Most companies will not allow you the flexibility with distributions from the K-plan. If this is the case then you must make the IRA Rollover and begin 72(t) distributions.
Jim2008-01-30 08:39, By: Jim, IP: [220.127.116.11]
L2: 401K to IRA – then 72tI wouldn”t roll over a 401-K into an IRA after 54 1/2, in general. In his case, if the 401-K allows withdrawals that are enough until 59 1/2, then I would leave it there and take the withdrawals. At 59 1/2 he could rollover the 401-k into the IRA, and have complete flexibility of the amounts and frequency, with no required minimum or maximum until 70 1/2. But he is “locked in” for 5 years if he starts a SEPP 72-T before 59 1/2.2008-01-30 13:44, By: dlzallestaxes, IP: [18.104.22.168]
L2: 401K to IRA – then 72tI agree with Jim on this one. My former 401k plan had no option for routine or non-routine partial payments. Some plans allow thiskind of flexibility but others do not.
I started my SEPP at age 55.5 so will continue the SEPP payments until age 60.5 to satisfy the 5-year 72t requirement. I can see where “being locked in for 5 years” could be a hardship in some financial situations but it has worked out well for me so far. I have access to other funds, if needed. For now, though, there is enough coming via my SEPP payments that all of my retirement expenses are being met.
Ed2008-02-02 16:26, By: Ed_B, IP: [22.214.171.124]