72(t) and still working
L1: 72(t) and still workingCan you draw from a 72(t) account, while still employed? In other words, if I am still working and collecting a paycheck, can I also get a monthly paycheck from my 72(7) account?2008-06-11 11:49, By: Doug1153, IP: [220.127.116.11]
L2: 72(t) and still workingDoug,The answer is yes, and this applies whether you started your 72t before or after you started on the job. In fact, once you start the 72t, you must continue it to the modification date, barring disability or death.
However, if you have a 72t and your job provides sufficient income, there is nothing good that comes from drawing down your retirement assets earlier than you need to. In that case, you might consider making a one time switch to the RMD method to reduce the 72t payout, maintain tax deferral and prevent the combined incomes from elevating your marginal bracket.2008-06-11 11:58, By: Alan S., IP: [18.104.22.168]
L2: 72(t) and still workingThank you for the quick response.
The reason for the 2 paychecks is to pay down some existing debt before I leave my existing job. I would only becollecting the 2 checks for about 6 months.On the prior comments, Alan referred to …
“a one time switch to the RMD method to reduce the 72t payout, maintain tax deferral and prevent the combined incomes from elevating your marginal bracket.”
Can you explain more about that statement?2008-06-11 12:18, By: Doug1153, IP: [22.214.171.124]
L2: 72(t) and still workingYes, this is an option that was introduced in RR 2002-62, which you can access on this site”s menu.
It provides flexibility and is the only change of methods allowed once a plan is started. Normally, you might expect that this change will reduce your SEPP payout 35 or 40% if your account balance has remained fairly stable. In a few cases where the balance has experienced substantial gains, there may be no reduction and conceivably even an increase in the 72t payments.Once the change is made, the RMD method must be used for the remainder of the plan term using updated age and 12/31 account balance each year. As such the annual payment can fluctuate considerably and can be further reduced by bad markets (like we are currently “enjoying”).2008-06-11 13:17, By: Alan S., IP: [126.96.36.199]
L2: 72(t) and still workingBe careful of your treminology. You CANNOT take a “PAYCHECK” from a SEPP 72-T.You can only take distributions. Paychecks are received from emploeyrs, and are subject to payroll tax withholdings for FICA/SS, Medicare, state and local income taxes, in addition to federal income tax withholdings.
You properly called the paychecks that you receive from your employer, while employed,, but “misspoke” when discussing monthly “paychecks” from your 72-T.
Once you start a SEPP 72-T plan, you mustcontinue it for the longer of 5 years or age 59 1/2.It is immaterial if you are employed or not at any time during the SPP 72-T distribution period. I f you do not want to take withdrawals from you SEPP 72-T for that long a period of time, then do not start one.2008-06-11 15:09, By: dlzallestaxes, IP: [188.8.131.52]