72t distribution

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L1: 72t distributionIf a client starts his monthly 72t payments in October does he have to take out a full years payments for that calender year to satisfy the 72t rules?Please back up your answer with where I can find it in the IRS code, interpretive ruling , etc.2009-12-16 21:35, By: allan k booher, IP: []
L2: 72t distributionallan,You may have seen from other posts that the IRS has not included much regarding 72t plans in the actual tax code or IRS regs. Note the thread relating to citations on the final stub year situation options and the response from gfw, proprietor of this site. A combination of interpretations of RR 2002-62 and IRS letter rulings and administrative patterns over the years has given rise to these conclusions.There has been virtually no debate that in the first year of your plan you have the option of taking out either the full annual amount or the pro rated amount based on the month of your first 72t distribution. Anything in between those amounts is not acceptable. Accordingly, a client taking the first distribution in October can take out either 3 months worth (25% of the annual figure) or the full annual figure. Either is equally acceptable, and 72t participants over the years have probably elected their first year distribution using either method in nearly equal amounts. But whatever amount is elected in the first year, the modification date of the plan does not change. The mod date is the 5th anniversary of the first 72t distribution. See the calculator on this site. Someone might opt to take the full annual if there they suspect that their distributions might run short of expenses in later years due to inflation or unexpected expenses. The extra months can be saved or invested outside an IRA to provide an emergency funding source for later expenses. This is not necessarily a permanent loss of IRA assets because taking a full year in the first calendar year can also allow you to stop distributions sooner in the final year after 60 months has already been distributed. If you start in October, you do not have to make the final decision until late December if you think you want to take the other 9 months out.2009-12-18 02:25, By: Alan S., IP: []