break 72T with a withdrawl
L1: break 72T with a withdrawlQuestion….I have started 72 T as of 4/11.(i retired and am 54)(do plan to get another job)I have rec’d 2 monthly payments. I am in position that I need to take a lump sum withdrawl.($40,000) I know there is 10 % tax penalty but was told today that my 72T will also be stopped.MY finance person did not tell me this. .is it true? or does it mean that another one will have to be started based on the new total in my traditional IRA after the withdrawl. I knew this withdrawl might happen and told the finance person this. I was told only about 10% penalty from IRS. and i kinda knew about taxing any earlier withdrawls which is why i am doing this early. any info you can provide will be appreciated. I also asked about opening 2 accounts so that any withdrawl would not affect my 72 T but was discouraged from doing this. I was told that I could get $$$ if I needed it but with 10% penalty and I understand that.
2011-06-21 01:01, By: dee, IP: [126.96.36.199]
L2: break 72T with a withdrawlHow much was in your IRA account(s) when you started the 72-T ? If you had a significant balance, then you might not have busted your 72-T, but might have used up your withdrawals for 2011 based upon the calculated annual limit.
What is the reason for the lump-sum withdrawal ? Does any of it qualify under any of the other exceptions ?
You should have understood everything about SEPP 72-T plans BEFORE youb started. Your finance person should have fully understood your plans, and let you set up a 2nd account for the possible future withdrawal. Then, if you did not need that withdrawal, you could have set up a 2nd 72-T without busting the first one.
It is probably best to terminate the first one now, and start a new 72-T in July. You would have owed the taxes and 10% penalty on those withdrawals anyway.2011-06-21 01:10, By: dlzallestaxes, IP: [188.8.131.52]
L3: break 72T with a withdrawlthanks for info . is that possible for me to end this one and start new one in july?.that’s OK with me just worried about the wording that it will be “stopped” without any more info than that til tomorrow..my finance person is calling to see what the 72T will be stopped means at the bottom of the letter i rec’d to sign before withdrawl is done. I would think they would KNOW that. i don’t want to say how much but only rec’d about 3000.00 in the 2 months. One should have some option this early on especially when we rely on finiance “expert” and find that maybe they aren’t such an expert. I did have several referrals. I really disappointed. Just want to get this withdrawl and move on. No it does not fall under anyexemption. but is not for the wrong reason. I thought this might need to happen and voiced, that. I OK with the 10 %. I have to be but am worried bout this 72T stopping. Finance person NEVER said that. thanks again for info2011-06-21 01:30, By: dee, IP: [184.108.40.206]
L4: break 72T with a withdrawlPerhaps they just mean that your plan will be busted with the large distribution, and a busted plan simply ends. All that means is that you must pay the penalty on all IRA distributions taken to date that do not qualify for an exception other than the SEPP exception.
An IRA custodian cannot deny you from taking the distributions you want, so all this means is that they are telling you that your current plan is busted.
Actually, you may have other options in addition to what dlz mentioned, but we would have to know more details before recommending anything. The most basic advice now is to not start a new plan until you have done the amount of planning needed to make it last the 5 years or so needed.
Note that for your current plan which you started in April, you have the option to take out either 75% or 100% of the annual calculation, but the extra 3 months will probably not be enough to save the plan.
Another option here is that since there are no direct tracing rules for IRA distributions, if you started another plan soon but are stuck with several thousand of penalized distributions, you can use any exceptions other than the 72t exception to erase the penalty on some of the distributions prior to starting your new plan.
2011-06-21 03:28, By: Alan S., IP: [220.127.116.11]
L5: break 72T with a withdrawlthanks for the info Alan…I am begining to relax a bit now . I have been a wreck all eve due to this and my finance person seems to be avoiding me instead of helping me. not responding to my panic emails/calls to the office etc today. This is all new to me and can be scary when there is info you don’t understand. think i got it now. You can bet I will only do this once !! haha2011-06-21 03:47, By: dee, IP: [18.104.22.168]
L6: break 72T with a withdrawlDee:
If you haven’t relaxed by now, focus on that. Since you are early in your plan you can do some “clean up” and “restart” as Alan suggested. But before you do start a new SEPP Plan, please do some research on this site to become more knowledgeable than your “finance guy” and you’ll be able to run a plan without problems.
Being a “finance guy” myself, it sounds like your guy doesn’t really know enough about 72(t) to provide adequate advice. Unfortunately that is the norm and you have to find the right advisor to work with. He may be OK on the investment side but short on the 72(t) side.
The folks posting here are very knowledgeable about 72(t) and will be more than happy to help you. We don’t know who you really are so you can provide basic information … like DOB, value of your account, and desired / needed annual distirbution amount … so we can help you with calculations. We don’t provide investment advice. Besides, 72(t) is a “tax” issue.
Jim F2011-06-21 18:52, By: Jim F, IP: [22.214.171.124]