72t and Dividends
L1: 72t and Dividends
Through the help of this site we successfully established our 72t in October 2010. My birthdate is 4/21/1956 and we have no plans to make any changes. However, I would like to know if we can arrange for some dividends to be sent directly to us instead
of reinvesting them. This would really help our cash flow. Is this allowed given that we already established our 72t? Thank you.
2011-08-13 21:05, By: Dennis, IP: [188.8.131.52]
L2: 72t and Dividends
I’m guessing that you are talking about dividends payable in the SEPP IRA account. If yes…
You can have dividends sent to you as long as you reduce the amount received as the annual SEPPdistribution by the amount of the dividends received. From the SEPP IRA, you can receive no more than the calculated annual distribution for any year.
2011-08-13 21:23, By: Gfw, IP: [184.108.40.206]
L3: 72t and Dividends
Since receiving the dividends would not result in any greater total distribution for you and since dividends frequently change in amount and even issue dates, you should forget about this idea. You would always be making adjustments
to keep your total distributions exactly correct and would get no more money out of the IRA than setting up a standard distribution plan, eg. quarterly or monthly.
If you do not have the dividends reinvested and instead the cash goes to your sweep money market or bank deposit funds, they can help maintain cash levels to fund your usual SEPP distributions.
2011-08-13 23:39, By: Alan S., IP: [220.127.116.11]
L4: 72t and Dividends
Let mecombine the above answers, and explain why.
The SEPP 72-T plan requires an exact annual distribution. If you present plan provides enough cash flow for cash to be distributed, then you CAN reinvest dividends. HOWEVER, if the present reinvesting of dividends means that your cash flowwould beinadequate
to provide for your annual distributions, and you would have to sell something each year to make up for any shortfall, then definitely discontinue the reinvesting of dividends in your SEPP 72-T.
BUT, if you are asking if the dividends from your SEPP 72-T can be distributed directly to you by the companies or mutual funds IN ADDITION TO the cash distributions from your SEPP 72-T, then the answer is a definite NO. Interest and dividends on investments
in SEPP 72-T plans provide cash for the annual distributions. Whenever this income is not enough to satisfy the require annual distribution, then investments have to be sold. If the annual SEPP 72-T distributions are not enogh to satisfy your NEEDS, then you
may have to reconsider having a SEPP 72-T plan which may be busted, which would then be subject to the 10% penalty RETROACTIVELY on all cumulative distributions. This can become very costly, especially if it happens near the end of the plan term.
2011-08-14 03:21, By: dlzallestaxes, IP: [18.104.22.168]