72T depletion prior to 59 1/2
L1: 72T depletion prior to 59 1/2I began a 72T SEPP withdrawal @ 48. It has now obviously been 5 years, but I will be 58 in October, when it runs out of $.
I have the original calculation documents done by my Broker, and all related info.
Question:Even though under the “Special Rules” section, this is defined as exempted
from tax,and not “busting” the Ira. I am still thinking it may trigger an audit, and might be easier if I add enough $ to it to get to 591/2. Is this allowable?2009-05-11 15:21, By: pomomofo, IP: [18.104.22.168]
L2: 72T depletion prior to 59 1/2Adding money to an account will be an automatic “bust” so don’t do it!
You have the option to change from either the Fixed Amortization or Fixed Annuitization methods to the RMD Method which will reduce your required payout. However, you need to do this quickly as you will probably have to “rollover” some of the already distributed funds back into the account if done within 60-days of distribution. As late as it is in the current year, you may have already withdrawn way more than is allowed for the RMD Method so you may not have this option.
Now for the “good news.” If you wind up running out of mony in October as you state, that does not constitute a “busted plan” and no penalty is assessed. The bad news is you are out of money.
Jim2009-05-11 15:33, By: Jim, IP: [22.214.171.124]
L3: 72T depletion prior to 59 1/2I knew that the depletion is not a problem,assuming the proper guidelines in place at the time(life expectancy tables….) were used.I just was not sure if I could add to it.
The only reason it occurred to me is that I thought perhaps the way it is reported(as u probably know most Brokerages changed the way they reoprt 72T’s on 1099’s, and no longer show it as exempted,..thus my accountant files the extra form for this $ each year)..thought it could trigger an audit,as I am not sure how Fidelity will treat is,particularly the final payment, which willl be an amount less that the ampunt I have gotten monthly since inception.You are right , it is too late to make that change in method you suggest, and also would not work as far as income9I did the math on it once before)
BTW- Good news is, I have a sum set aside to draw the same amount from for the “gap’ years until I can take early SS @ 62.
mj2009-05-11 15:53, By: pomomofo, IP: [126.96.36.199]
L4: 72T depletion prior to 59 1/2Sounds like the best plan for youis to deplete the account and the SEPP will die a natural death. I’ll let one of the CPA’s address the mechanics of dealing with this situation.
One item to remember is that you will receive IRS Form 5498 in 2010 which will state the value of this account on 12-31-2009 which will be $0.00. That will help justify what happened and help support the fact you do not have a busted plan.
Jim2009-05-11 16:05, By: Jim, IP: [188.8.131.52]
L5: 72T depletion prior to 59 1/2Once your SEPP plan terminates for lack of funds ( -0- ), you do not have to take out funds from any other IRA. You can just stop. You should have your accountant check your tax situation. If you are in the 15% tax bracket, then it would probably be advisable to continue to draw up to the limit of taxable income ( $ 33,950 single, $ 67,900 joint). If you have enough to go beyond 62, you will get more SS benefits per month the longer you wait.
Do some long-range planning.2009-05-11 19:11, By: dlzallestaxes, IP: [184.108.40.206]
L2: 72T depletion prior to 59 1/2Sorry, but no additional funds can be added without busing the plan and having penalties and interest applied back to day 1.
You probably aren’t the first person to run out of funds. If you do get an audit, merely document what happened.2009-05-11 15:33, By: Gfw, IP: [220.127.116.11]
L3: 72T depletion prior to 59 1/2It appears you have some taxable assets to draw from to get you to age 59.5. However, if you DID not have those assets, only other IRA or qualified plan assets that could be rolled into an IRA, and you need considerable funds prior to age 59.5, you could start another72t plan, nothwithstanding that it would have to run 60 months from the date you started it. Since you are 58 now, it is best to avoid that, but the option is there if need be. As gfw stated, DO NOT transfer any funds into or out of the current 72t account, just let the account # permanently expire. For that matter, as long as the remaining value plus what you have already distributedis less than your annual distribution, you can drain the account right now. The date the original account is exhausted has no direct bearing on how or when you could start an independent 72t accountusing a differentIRA account.
Although much more info is needed to advise on the issue, IF you start another plan that must run 60 months, you may find it useful to defer the SS start date and eliminate some of the 25% penalty you would be saddled with. The penalty is 5/12 of 1% per month from 62 to 63, and 5/9 of 1% per month from 63 to 66, your normal retirement date. 2009-05-11 21:11, By: Alan S., IP: [18.104.22.168]