L1: 72(t)I’m currently 55 and am thinking of retiring until I started reading about the rules on the 72(t). What currently puzzles me is that rebalancing your portfolio at any given time during the 5 year period constitutes a violation to the rule, specifically “any addition to the account balance other than gains or losses”.
Excerpt from IRS Revenue Ruling 2002-62
“(e) Changes to account balance. Under all three methods, substantially equal periodic payments are calculated with respect to an account balance as of the first valuation date selected in paragraph (d) above. Thus, a modification to the series of payments will occur if, after such date, there is (i) any addition to the account balance other than gains or losses, (ii) any nontaxable transfer of a portion of the account balance to another retirement plan, or (iii) a rollover by the taxpayer of the amount received resulting in such amount not being taxable.”
It seems to me that if I can sell off funds to a cash withdrawal account I should be able to rebalance my portfolio based on current economic conditions. Why should I have to hold on to a fund that is tanking? It seems to me that if this is the case there truly is no need to be paying for a broker during this time frame since you are unable to move the money around.
Thanks2012-11-15 15:24, By: wtf57, IP: [22.214.171.124]
L2: 72(t)Start by reading our “Planning Pointers” at http://72t.net/72t/Planning/Pointers- in particular the paragraph titledSEPP Custodial Account.
You can re-balance your account at any time – you just can’t transfer any new funds into theSEPP account and you can’t take any amounts out of the SEPP account except for the actual SEPP withdrawal.2012-11-15 15:31, By: Gfw, IP: [126.96.36.199]
L3: 72(t)Thanks for the response. I did look at the planning pointers but must have missed that. I guess it’s back to the broker to talk about a SEPP Custodial Account.2012-11-15 15:39, By: wtf57, IP: [188.8.131.52]
L4: 72(t)If you use a “brokerage account platform” for your IRA (in effect a self-contained box),you can rebalance and trade investments within the box (IRA account) and you have not violated the SEPP rules.
However, once established,if you decide to transferassets infrom another IRA or qualified plan account, or transfer assets out to another IRA or qualified plan account, you will “bust” your SEPP Plan.
Jim F2012-11-15 15:56, By: Jim F, IP: [184.108.40.206]
L5: 72(t)If your broker did not, could not, clarify these basic rules, I suggest that you consider changing to one who is experienced with SEPP 72-T plans.2012-11-15 17:00, By: dlzallestaxes, IP: [220.127.116.11]