annually recalculated amortization plan

L1: annually recalculated amortization planWhen reading “The Practical guide to SEPP” I found a section stating that it is OK to split my IRA into(2) 72t’s. One that uses the fixed amortization method and a second that uses the amortization method thatis recalculated each year. The flexibility (in a volatile market)afforded by this strategy seems attractive, but I am concerned that it would be a “red flag” to the IRS because it seems so “unconventional” and I am concerned about the administration of such a method because of its complexity. Would you reccommend this method? Or are my fears warranted?2010-02-25 16:51, By: PHS, IP: [144.160.130.16]
L2: annually recalculated amortization planThe administration of your plan(s) is your responsibility, not any broker or mutual fund company.So, if you think that you can handle it, that’s fine.Another alternative is to vary the size of 2 or more plans, and leave an amount outside of the SEPP plans for emergencies, where you would be subject to the 10% penalty only on the emergency additional funds you needed, but not retroactively by busting the entire plan.2010-02-25 17:06, By: dlzallestaxes, IP: [173.49.30.37]

L2: annually recalculated amortization planWhen you indicate “split your IRA into 2 72t plans, note that it must be a separate IRA account for each, you cannot split ONE IRA account into two 72t plans.Personally, I would not recommend doing this, but as long as you have separate IRAs, you can have as many 72t plans as you wish, each independent of the other. The reasons I would not recommend this are:1) Added complexity and number of calculations increases risk that you will make an error2) Added complexity increases the chance of having to explain this to the IRS in a way that they will understand, ie unwanted attention.3) Chance of negative distribution results from recalc about equal to the chance of positive distribution amounts, ie just a wash. The negative results might be having to take out more than you need or a drop in account value leaving you short of your needs and resulting in either sacrifices or busting your plan.In summary, I think your concerns are warranted, but as DLZ indicated, it is your decision to make. Note that if you happen to bust one plan, the other plan is not affected, so you do have somewhat of a hedge here against the cost of an error.2010-02-25 19:00, By: Alan S., IP: [24.116.165.60]