L1: 72t distributionSorry, for another note but I do not see how to follow up to my previous email. I’m the 56 year old Ed.
I have a IRA and a rollover IRA with one firm. Each IRA has several mutual funds. Each funds has a seperate account number and notes whether it is in the IRA or rollover IRA.
This firm believes the IRA would consider these as one IRA account. I receive one quarterly statement showing activity under my name (which is both IRAs).
So, for SSPP how many accounts do I have? Do I have 2 accounts? Or is each mutual fund a seperate account? If this is one account, then I need to break it up another at least 2 accounts. One for my SSPP and the other for use in higher education expense or when I turn 59 1/2.2009-06-09 21:29, By: Ed, IP: [126.96.36.199]
L2: 72t distributionThe number of statements is immaterial, but it is absolutely critical for you determine the number of actual IRA accounts here and the balance in each before you even consider a SEPP.
This situation sounds like Vanguard, which uses a very confusing account platform. Is it? When the IRA custodian itself suggests the IRS may consider the accounts combined, you can’t safely start a SEPP.
I know that Vanguard also has problems with recharacterizing Roth conversions and they claim they must use the earnings of more than the account that actually held the conversion. I think this comes from their history as a mutual fund company only and trying to maintain their old account platform even when you open a brokerage account there. I would not be comfortable using them for a SEPP despite their other cost advantages and service.
Relative to the education exception in the Benz case, as others have stated, the IRS may well appeal that decision, and you should not depend on it as this early date.
That means that you should keep the amount needed for additional education costs ina separate IRA account outside of a SEPP. But if you don’t and take additional amounts from the SEPP account, you will bust the plan and owe retroactive penalties and interest for all amounts taken out prior to age 59.5, but NOT those taken later. Putting this another way, the extra distributions you take after 59.5 will not be penalized, but would cause the ones you took earlier to become retroactively subject to penalty and interest. Perhaps by the time you took the funds, Benz would be backed up with more cases and letter rulings. It might even be expanded to more exceptions than higher education. There is really no way to predict with confidence where this issue will be 3 or 4 years from now.
2009-06-09 22:39, By: Alan S., IP: [188.8.131.52]
L3: 72t distributionThe custodian is American Century. The front page of the statement has my portfolio summary, then there is a page for each mutual fund. I can ask again, but the last time I called they mention it is considered one IRA. Perhaps, if I tell them that I will move part of it (either the IRA or IRA rollover acct) to another custodian to ensure I have two accounts, they will rethink this.
But isn’t up to the IRA to determine the idenfication of an account and not the custodian?
2009-06-09 23:03, By: ed, IP: [184.108.40.206]
L4: 72t distributionYou should not have to move part to another custodian, although you could. American Century should be able to partition the IRA anyway you wish into two or more IRA account numbers. You could make the decision which funds went where or could split them all 50-50 if you wanted to, as long as you ended up with clearly separate IRA accounts.
The IRS only reacts to the 1099R and 5498 forms they receive from the IRA custodian. Each separate account requires a separate 1099R.
One goal you should have is to establish the SEPP IRA with the account balance that will produce the annual distribution you will need at least until age 59.5. After that, if you need more, you can take it from the non SEPP account. You can also take a higher education distribution from the non SEPP account at any time without paying an early withdrawal penalty.
2009-06-09 23:25, By: Alan S., IP: [220.127.116.11]
L5: 72t distributionIf the figures work, why not use only either your IRA or Rollover IRA account for your SEPP 72-T ?
Otherwise, why not combine these accounts together because there is no longer any benefit/reason to have a “ROLLOVER”IRA. Tax laws were changed to permit transfers between employer plans and IRAs, and vice versa.. 2009-06-10 03:02, By: dlzallestaxes, IP: [18.104.22.168]
L2: 72t distributionEd:
Look for something like the following for the accountnumbering structure on your statements.Some fund companies use a 3-part system consisting of the following:
1. Fund number to identify each separate fund and share class.
2. Account number.
3. Client number to track all funds within one account. This is optional and you may not have it.
For example, 0123-987654 with 0123 being the fund number and 987654 being the account number. Typically your quarterly statement will have a summary list of each fund you own on the first or second page, followed by a separate listing of each fund with a summary of all activity for that fund in the quarter.
The client number is totally different from the fund-account number and is used to tie together all funds withing one account. Typically this number will be located near the top of the first page of your quarterly statement, if you have it. Most companies have gotten away from the Client Number and simply track the whole bag with the Account Number.
Locate your account number and determine which funds it contains. If your TIRA and Rollover IRA funds are all contained under one account number, then your funds have been “comingled” and you only have one IRA account. But if you have different Account Numbers for these two types of IRA’s, then they are still separate and you can move them around either at American Century or move some to another custodian. If you set up an IRA at another custodian using a brokerage platform, then you can simply transfer the AC funds “in kind” into the new account. Doing this will take care of any arguement that you have two, separate accounts.
Hope this helps.
Jim2009-06-10 14:10, By: Jim, IP: [22.214.171.124]
L3: 72t distributionI do not see a client number (one overall number on first page). All I see is the xxx-xxxxxxxxx format on each fund. So it appears to be fund and account number you referred to. Each fund has its own summary page…. Beginning balance, additions, withdrawals, appreciation/depreciation and ending balance. There is an “Investor Class” for each fund which is either “IRA” or “IRA-Rollover”.
I have the same fund in both the IRA and IRA Rollover. Example, (numbers not real but illustrates my point). Equity Income fund in the IRA would be like 150-8000045657 and the Equity Income fund in the IRA Rollover would be like 150-8000045658. Only the last digit is different, but each on a seperate page in their own Investor Class.
2009-06-11 23:31, By: Ed, IP: [126.96.36.199]
L4: 72t distributionOK. It sounds like you have two separate accounts; IRA and IRA Rollover. If all of your funds with thefirst “Account Number” are designated as IRA, and all of the funds with the second “Account Number” are designated as IRA Rollover, then you have two separate accounts to work with. It doesn’t matter whether you have some of the same funds in both accounts. The key is “different account numbers” and I think you’ve got it.
Jim2009-06-12 15:34, By: Jim, IP: [188.8.131.52]