5 year rule when switching financial institutions on 72t
L1: 5 year rule when switching financial institutions on 72tI am 59 years old, will turn 60 in 3 months, and started a 72t over 5 years ago. After making 72t withdrawals with one financial institution for 6 months, I switched to a different financial institution and started a 72t without missing a payment and keeping the withdrawal amount exactly the same. The five years with the second institution won’t be over in 3 months.
I now want to end the 72t in order to take a larger amount to purchase property, and would like to purchase the property now. My question is can I end the 72t now, or do I have to wait 3 more months.
So another words I’ve been making the same withdrawals for a total of 5 years and 4 months, but for only 4 years and 9 months with the same financial institution. Does that sounds like it satisfies the five year rule? Thanks in advance2011-04-20 02:36, By: vinnienap, IP: [184.108.40.206]
L2: 5 year rule when switching financial institutions on 72tUse this calculator to determine when your plan has ended:
The 5 year minimum requirement is not affected by the number of IRA custodians you have, and it appears your plan modification datemay already have been reached, but we need to make sure. Also, confirm that you took a full annual distribution for 2006-2010, and that you also took a distribution for Jan-April of this year and we can determine where you stand.2011-04-20 02:58, By: Alan S., IP: [220.127.116.11]
L3: 5 year rule when switching financial institutions on 72tThanks, Alan. My first distribution was 12/29/2005, and I’ve had distributions every month since, including Jan-March of this year, and I’m scheduled to receive another distribution at the end of April. So yes, full annual distribution for 2006-2010, and distributions for Jan-April.2011-04-20 03:08, By: vinnienap, IP: [18.104.22.168]
L4: 5 year rule when switching financial institutions on 72tAre you just being extra careful in asking if there is a new 5-year period at each institution, or is there a misguided soul at the new institution giving you the wrong information ?2011-04-20 14:27, By: dlzallestaxes, IP: [22.214.171.124]
L5: 5 year rule when switching financial institutions on 72tI’m being extra careful. All I knew was that I had to continue the 72t distributions for five years. Was uncertain about the two different IRA custodians. I have a call in to my cpa but he’s been tied up with tax season and don’t want to risk having to pay 10% on the total five year distribution amount. I can wait until July to end to 72t but I have an opportunity now to purchase a piece of property for a good price.2011-04-20 15:41, By: vinnienap, IP: [126.96.36.199]
L6: 5 year rule when switching financial institutions on 72tDid you enter your DOB into the calculator? If your prior age info is correct, the calculator should indicate that your 72t plan ended on some date in January, a couple days after you turned 59.5.
Accordingly, if your January distribution was taken before that modification date, it was the final payment for your 72t plan. All distributions taken after the modification date were not 72t plan payments, just optional payments that were not required by the plan. You can stop the April payment if you wish but probably want the money to make the purchase.
You will get two 1099R forms for 2011, unless the January payment was actually made on or after the date you reached 59.5. If the payment was made prior to that date, you will probably need a 5329 to claim the 72t exception. Payments after 59.5 are of course penalty free.
2011-04-20 21:42, By: Alan S., IP: [188.8.131.52]
L7: 5 year rule when switching financial institutions on 72tI plugged the figures into the calculator and here are the results:
Attained Age on 1st Payment Date
5-Year Period Ends
Date Age 59.5
First Payment Modification Date
You think everything looks ok? Was mainly concerned with the 2 different custodians.
Thanks2011-04-20 22:07, By: vinnienap, IP: [184.108.40.206]
L8: 5 year rule when switching financial institutions on 72tNo real problem, but technically the January payment was a 72t payment if it was distributed (that is a couple days before you received it) before 1/7. Otherwise, it is just a normal distribution after the plan ended and not part of your plan.
If it was distributed prior to 1/7, it is a good thing that it was just another monthly installment or it could have busted your plan because it would not have been a payment that met 72t requirements. Prior to 1/7 there were only 3 approved options:
1) Distribute nothing
2) Distribute 1/12 of the annual
3) Distribute the full 12 month annual amount
My impression was that you did either 1) or 2), both of which are OK, and therefore you are free to do whatever you wish from here on. All distributions will be taxable but penalty free.2011-04-21 01:27, By: Alan S., IP: [220.127.116.11]