72(t) aggregation rules
L1: 72(t) aggregation rulesI am trying to research the aggregation rules for calculating a 72(t). I am trying to accomplish breaking up assets a bit and creating two buckets of money. We have a 401(k) with 600K. We would like to set up one IRA for the 72(t) amounts which would come out to ~ 235K with the remainder in a more growth oriented product. I can not find any mention of account aggregations anywhere. I am sure that we can break up these accounts use the combined amount and take distributions from one. We could conceviably segregate other IRA assets as well I beleive. First can I do this and reccommend it and 2nd do you know where it may be referenced anywhere.2009-08-19 16:09, By: Maverick, IP: [22.214.171.124]
L2: 72(t) aggregation rulesSlow down and back-up.
What is your situation ?
What are your ages ?
I assume “we” is you and your wife. There is no “aggregation” as to spouses. Each of your 401-K plans and IRAs are separate and distinct.
There is no “aggregation” as to IRAs, other than the fact that you must pre-determine which IRA account(s) you are considering as your SEPP 72-T “universe”. Any IRA accounts not in your “plan universe” are separate for calculation purposes.
If you or your wife are 55 or older (or will be before 12/31/09), and that person “separates from service in 2009”, then you will not have to set up any SEPP 72-T because the situation will be an exception to the 10% early distribution penalty provisions. Further, if there is company stock in your 401-K, immediately ask your HR dept for the “NUA COST BASIS” because you will probably save a lot in taxes by utilizing that provision in the tax code.2009-08-19 16:47, By: dlzallestaxes, IP: [126.96.36.199]
L3: 72(t) aggregation rulesThank you for your response. I have a client that is separting from service he is 53 yrs old. They need to bridge the gap to social security. That’s where 72(t) comes into play. I would like to reccomend breaking up that 401(k) into 2 separte rollover IRA’s. First we would calculate the 72(t). Then we would break up the acounts appropriately, one account would hold the money to meet the 72(t) requirements we would put that into a money market or fixed account of some type. 2nd we would take the remainder and put that into something more growth oriented within reason. If I can accomplish this, is there any special forms that I would need to notify the IRS of which accounts I am “freezing” for 72(t) purposes? How is the IRS notified of these accounts. I would like to possibly set up these 72(t) accounts with different investment houses. The client does have other qulaified assets that he would like to keep out of the calculation of the 72(t) and this would allow some freedom @ age 59 1/2.2009-08-19 17:14, By: maeverick, IP: [188.8.131.52]
L4: 72(t) aggregation rulesYour plan is exactly correct. The IRS ( for some unknown reason) does not require you to file any documentation with them as to your ” SEPP 72-T plan” and which account(s), dates, and balances you are using. Some financial institutions do require that info.
However, make sure that the client does document al of this info. As a CYA, he might want to include this basic info as a footnote to his tax return for each year until he reaches 59 1/2.2009-08-19 19:09, By: dlzallestaxes, IP: [184.108.40.206]
L5: 72(t) aggregation rulesThank you. I think that is a great idea as far as including the footnote. What worries me is the lax reporting and lack of clear cut language in the IRS regs. . . .I had to go to a PLR from 1998 in order to uncover the aggregation rules. You would figure that it would be mentioned some where. Do you know of any updated IRS regs where it mentions this rule? 2009-08-19 19:25, By: maverick, IP: [220.127.116.11]
L6: 72(t) aggregation rulesNo, because there is no “aggregation”, only “aggrevation” in understanding and dealing with the IRS.2009-08-19 19:29, By: dlzallestaxes, IP: [18.104.22.168]