72(t) annual withdrawal dates
L1: 72(t) annual withdrawal datesIf I setup a 5-year SEPP plan and take my first withdrawal on 10/1/2014, what are the guidelines for when I can take my second annual withdrawal? Would I be able to take it anytime in 2015 (before or after 10/1) or would it have to be on the same date, etc? Thanks.2014-08-04 23:45, By: rafiz, IP: [188.8.131.52]
L2: 72(t) annual withdrawal datesYou have numerous options :
1. In each calendar year you must take the same annual total of distributions, but you are permitted to take a prorate distribution the first and last year (i.e. 3/12 in 2014 and 9/12 in the 6th calendar year 2019).
2. You can change the frequency of your distributions in each calendar year, so long as you do not exceed the annual total.
3. You can decide what your needs are, and the tax consequences. For example, if you are in the 25% tax bracket this year with 3/12 of the annual distribution, but will be in the 15% tax bracket next year, then you save 10% of the distribution of the other 9/12.
4. If you have a 401-K, and are or will be 55 during 2014, then you may not need a SEPP 72-T. Ask your company if they allow partial distributions from the 401-K. You did not tell us your DOB.
5. If there are company shares of stock in your 401-K, then ask your company about their cost basis, and research the special tax provisions for NUA (Net Unrealized Appreciation).
Check elsewhere on this website re # 4 and # 5.2014-08-05 00:02, By: dlzallestaxes, IP: [184.108.40.206]
L3: 72(t) annual withdrawal datesThank you for the reply. My DOB is 9/5/58 and the account is not a 401(k), nor does it contain company stock. Correct me if I am wrong, but my understanding of your #2 is that I am in accordance following taking either the annual or pro-rated payment in year 1 as long as I take the second annual SEPP at some point in 2015 (whether it is in a lump sum or some other frequency) and whether that be prior to, on, or after 10/1/15 (first anniversary of first SEPP) but by 12/31/15. 2014-08-05 05:58, By: rafiz, IP: [220.127.116.11]
L4: 72(t) annual withdrawal datesAlso remember that based on a 10/1/2014 start date, that you must take 5 times the annual amount over the five year period that will end on 10/1/2019 – no more and no less.
If you take a pro-rated amount in year 1, you will also be taking the opposite prorated amount in year 5.2014-08-05 09:05, By: Gfw, IP: [18.104.22.168]
L5: 72(t) annual withdrawal datesTo clarify a detail that GFW mentioned, your first mod date is 10-2-2019, and in order to meet the 5 year’s worth of annual distributions, if you prorate 2014 distribution, it is the 6th year, or2019, when you would be able to do the opposite prorating of the payment, and that would then add up to a total of 5 annual distributions. Yr 1 and 6 prorated distributions= one full year of distributions, and years 2, 3, 4, & 5 = the other 4 yrs of distributions, for total of 5 yrs worth of distributions.2014-08-05 17:40, By: Ken, IP: [22.214.171.124]
L4: 72(t) annual withdrawal datesBy setting up a SEPP 72-T, you will be locked in for the entire IRA for 5 years until you are almost 61, rather than only 3 1/2 years until you are 59 1/2 when you could have complete flexibility as to the withdrawals you make at any time and in any year.
I would consider a home equity loan or letter of credit, if available, to cover you until 3/5/2018. Another alternative would be to consider how much you need over the next 3 1/2 years, and the extra 10% penalty on those distributions, and your ability to time your distributions so as to be taxed at 15% vs 25%, which would be a “breakeven”, but give you better flexibility 1 1/2 years sooner.
If you have non-retirement investments, then you could liquidate them over the 3 1/2 years. If you are in the 15% tax bracket, then there are no federal income taxes on the gains, and if you are in the 25% tax bracket, then only the gains are taxed at 15%, but that is only on the amounts in excess of your costs. If you have bought the stocks or mutual funds over a period of time, then make sure that you contact your broker and mutual funds, and set up your accounts as “specific identification”, rather than the FIFO costing default status. Then you can minimize your income taxes, probably in conjunction with your accountant as you do tax PLANNING for 2014 and future years. Another option would be to set up your non-retirement investment account as a margin account.2014-08-05 15:42, By: dlzallestaxes, IP: [126.96.36.199]