adding to 72T
L1: adding to 72TSince the decline in the stock market my IRA has insufficient principal to continue to fund my 72T distributions without using up the principal. Can I add funds to my SEP IRA so that I don’t deplete it, and if so how?2009-09-24 22:17, By: AlanZ, IP: [126.96.36.199]
L2: adding to 72TNo, adding funds to the IRA would bust your SEPP plan. You have two choices here:
1) Just let the account run dry. This does NOT bust your SEPP, it just ends it. You will not have to pay any penalty or interest if this happens. You can then start another plan if you have another IRA or source of retirement funds if you wish, but it would be a totally new plan and have to be maintained for the longer of 5 years or until age 59.5.
2) You could make the one time change to the RMD method, and along with the losses you have suffered, this will sharply reduce your distribution. Again, there is no penalty to do this, but the account may not produce enough for you to live on, although it will last longer before it runs dry. This option would only make sense if you do NOT need the funds that are currently being distributed from your plan. You need to consider what you would do if and when the funds run out, and this depends on your expenses and what other source of funds you have. What source were you considering when you mentioned adding to the current IRA?2009-09-24 22:45, By: Alan S., IP: [188.8.131.52]
L3: adding to 72TI would have added new funds. Since I’m 57 it seems smartest to let it run down. It likely won’t run out, just won’t maintain the principal balance. Thanks.2009-09-25 02:44, By: AlanZ, IP: [184.108.40.206]
L2: adding to 72TNo, you cannot add or take any money from a working SEPP / 72t plan other than the exactly calculated distribution amount.
If you used either the amortization or the annuitization calculation methods, you can make a one-time switch to the RMD method. Doing this will usually reduce your distributions by 40-50%. This is a 1-shot only deal, however, and cannot be undone without busting the SEPP. If you go with this, make sure that the smaller distributions from the RMD method are enough to live on. If not and you do it anyway, you will have to find additional income from another source, such as a part-time job.
2009-09-24 22:47, By: Ed_B, IP: [220.127.116.11]