L1: broken 72tIf a client busts his 72t with a large withdrawal, can he start a newSEPP after the withdrawal? If so, does it matter if it’s in the same calendar year or would it be better to wait until the following year?2010-10-25 20:31, By: dubkc, IP: [220.127.116.11]
L2: broken 72tYes, a distribution in excess of the annual amount busts the plan immediately. A new plan can be started in the next month after the plan is busted, but it will create some reporting challenges to communicate to the IRS what is being done. It would be simpler to wait until the next calendar year to start a new plan since the reporting will be easier and clearer, but this is not an absolute necessity.
The client also needs to carefully assess theamount needed to live on since the new plan will not get any credit for time spent in the former plan. The new plan must also run for 5 years or until 59.5 if longer. Since the current plan will be busted, some careful planning should be done before starting a new plan. If the client has enough total retirement assets, he should maintain a separate IRA outside of the 72t plan for emergency needs, and then his plan will be protected. That may not be possible with today’s record low interest rates, and client will need a larger balance to generate the distribution he had before due to those low rates.2010-10-25 22:45, By: Alan S., IP: [18.104.22.168]
L3: broken 72tthanks2010-10-26 02:07, By: dubkc, IP: [22.214.171.124]