5 year distribution and 59 1/2
L1: 5 year distribution and 59 1/2My SEPP plan had a first distribution on 01/09/08 and I am planning to take the final SEPP distribution in January 2013. My question is can I take the distribution on any date from 1/2/13 to 1/8/13 or do I need to wait to 1/9/13 or later.
I will turn 59 1/2 on 3/9/13 and also plan to take a normal distribution one day after this date. Am I correct to notify the firm holding the funds to code this correctly versus the last SEPP distribution in January 2013.
2012-12-30 17:20, By: Bob, IP: [22.214.171.124]
L2: 5 year distribution and 59 1/2You didn’t give your date of birth and normally I wouldn’t take the time to respond any post that asks for details and doesn’t give sufficient details to offer an answer.
I put your date of birth at 9/9/1953 – based on that date, your first plan modification date is 3/10/2013.
Assuming that you took a minimum of 5 annual distributions since 1/9/2008, you need take nothing during 2013. If you do take a distribution, I would wait untilafter 1/8/2013 or even better, the day after you turn age 59.5. 2012-12-30 18:58, By: Gfw, IP: [126.96.36.199]
L3: 5 year distribution and 59 1/2GFW,
His plan will be in its 6th year in 2013. Doesn’t this negate the 5 year rule?
Can he not take one of the following prior to 59 1/2 on 3/9/2013?
#1 Take the full amount
#2 Take a monthy pro-rated portion
#3 Take nothing at all
After 3/10/2013 he should be able to take any amount he chooses, and the custodian should be prudent enough to code any distributions after this date correctly.2012-12-30 19:35, By: Scott, IP: [188.8.131.52]
L4: 5 year distribution and 59 1/2You are absolutely right. With that said, I will always error on the conservative side and come 03/09/2013, he can do as he chooses.
Also note, there were certain assumptions like DoB that I made in my reply. A few days here or there, and it can merely add up to few problems. I might have also been more definitive had I had all the details up front… SEPPs aren’t a guessing game.2012-12-30 19:46, By: Gfw, IP: [184.108.40.206]
L5: 5 year distribution and 59 1/2Bob,
To make things as simple as possible with respect to tax reporting and the safety of your 72t plan, you should NOT take any distributions before 3/9/2013. You would then have only one 1099R to report and it will be coded “7” because the IRA custodian knows your DOB and when you turn 59.5.
If you need funds sooner and cannot wait till 3/9, then your best option if you have been taking fixed monthly amounts all along is to take your Jan and Feb monthly distributions only. But then you will likely have 2 1099R forms and a 5329 to report with your 2013 return.2012-12-31 01:28, By: Alan S, IP: [220.127.116.11]
L6: 5 year distribution and 59 1/2My DOB is 09/09/53 and have received one annual distribution beginning 01/09/08. I was under the impression to complete the five full years I would need to have one more distribution in January 2013, for the same annual amount. After my 59.5 date, 3/9/13, I understand I can withdraw any amount at any time and if I do take two distributions, one before 59.5 and one after that, there will be two separate codes respectively.
Thanks, Bob2012-12-31 02:12, By: Bob, IP: [18.104.22.168]
L6: 5 year distribution and 59 1/2In the Q and A section of your site there is the following, which I question if it would pertain to my situation.
Assuming the 5-Year rule, when can payments be modified?A. In 1998, a tax court held that a payment received by a taxpayer after he received five equal annual installments and after he reached age 59-1/2 was a modification of the Substantially Equal Periodic Payments.The Court held that the modification occurred within the 5-year period beginning with the first payment, thus triggering the recapture of the 10-percent penalty tax. The Service argued that the 5-year period began with the first distribution and ran until the end of the 5th year. The tax court agreed – the 5-year period closes at the end of the 5 years beginning with the first distribution, and does not end on the date of the 5th annual distribution.Arnold v. Comm., 111 TC No. 12 (1998).2012-12-31 02:36, By: Bob, IP: [22.214.171.124]
L7: 5 year distribution and 59 1/2Bob,
That case does not apply to you because you do not have a 5 year plan.You would have had a 5 year plan if you reached 59.5 prior to 1/8/2013. Further, in the 1998 case, the taxpayer took a non SEPP distribution before the 5 year period was completed.
Therefore, I stand by my earlier post, and agree with the post that provides you with 3 options from 1/1/2013 to your modification date in March. But the cleanest of the 3 is to take nothing during this period. You have already completed 5 year of distributions and you would only have to take the 6th (2013) if your plan had to run beyond 12/31/2013.2012-12-31 03:29, By: Alan S, IP: [126.96.36.199]