L1: 72t QuestionI am a 54 year old male looking to start a 72t. I have approximately 1,200,000 in an IRA and 335,000 in a 401K plus assests of 150,000 that I want to exclude from the 72t for emergency purposes. Could anybody give me an estimate on how much I could expect to receive monthly and possibly the best way to approach this so things work out. Thanks2009-11-14 15:04, By: chachi, IP: [188.8.131.52]
L2: 72t QuestionStart with the calculator at http://72t.net/SeppPaymentCalculator2009-11-14 15:07, By: Gfw, IP: [184.108.40.206]
L2: 72t QuestionChaci,In addition to Gordon’s advice, if you have an idea of how much you will need to take out of the IRA each year while the 72T is active(remember it is before taxes!!) then also use his “reverse calculator”, and plug in that desired annual amount, along with your attained age in 2010 to get an idea of how big an IRA you need to segregate prior to starting the 72t in 2010. Then you can move the rest (if not all the $1.2mill is needed) to another (new) IRA that can be used for emergency withdrawals wherethe 10% early withdrawal penalty will apply to only that specific “non 72T” IRAwithdrawal. It can later be split again if you need tostarta 2nd (probably smaller) 72t if needed, so you will still have a “non 72T” IRA (along with the 401k $$) left for another future emergency. By choosing amortization without annual recalculation, you can be assured highest payout for the money involved, and simplification since no annual recalcs are needed, and the final benefit is if you later don’t need this much, you can elect the one time (calendar year) change to Minimum withdrawal method, which you will see in the calculator yields a much lower annual figure. KEN2009-11-14 15:56, By: Ken, IP: [220.127.116.11]
L2: 72t Question
Congrats on building such a large retirement nest egg. Unless your tastes are quite extravagant or your needs many, this should be plenty to provide a comfortable and secure retirement.
Ken’s advice is excellent and you will do well to heed it. In view of your resources, however, the need for 2nd and 3rd IRAs seems remote to me. There is nothing wrong with splitting a large IRA into smaller pieces, however, if that serves your needs. Your other resources that would not be included in your 72t plan seem sufficient as a back-up to your 72t distributions.
I would recommend that you go to the Vanguard web site and do a search for SEPP. This should bring up a 20 page PDF document that you can download that describes creating and using the 72t exception to the 10% early withdrawal penalty tax. It also goes through each of the 3 IRS approved calculation methods and you can do your own SEPP withdrawal calculations, following their step-by-step guide. I did that and then double checked the result with the calculator on this web site. On my $33k annual SEPP withdrawal the numbers agreed to within about $0.50. I attribute this small difference to rounding differences and the number of decimal places used. It reassured me that these numbers were correct because they were so close.
2009-11-14 18:18, By: Ed_B, IP: [18.104.22.168]