How Can We Help?
< Back
You are here:
Print

busted 72t

Posted
Last Updated On
Bysk140

L1: busted 72tClient started a 72t when she was 59. The client wants to reduce her monthly payment eventhough she has not met the 5 year requirement. If she busts the 72t will she only be responsible for penalty and interest on distribution taken before 59 1/2? 2009-08-31 15:39, By: sk140, IP: [64.32.242.218]
L2: busted 72tStarting a 72t plan that late in life is almost always a poor idea. Unfortunately, she may not have had any other choice at the time.
If she used either the annuitization or amortization calculations to compute her SEPP amount, she is allowed to make a one-time switch to the RMD method without penalty. This usually results in a 40-50% reduction in distribution amount. She would probably have to do this in January 2010, as it is very likely that she has already distributed more from her account than the RMD calculation allows for 2009.
As to busting the 72t plan, my understanding is that only the payments taken before age 59.5 will be penalized. I am sure that Alan, Gfw, or dlz can confirm whetheror not my understanding is accurate.2009-08-31 16:59, By: Ed_B, IP: [98.246.95.248]

L3: busted 72tEd is correct, so short answer is “Yes”.
We do not know the specifics, but if the subject dollars distributed prior to 59.5 are modest enough, busting the SEPP may be worth it to preserve IRA assets, even with the one time switch to RMD as a viable option. This action would need to be assessed in some detail.2009-08-31 23:37, By: Alan S., IP: [24.116.165.60]

L4: busted 72tI agree. But I think that it makes sense to bust the SEPP now. The 10% penalty on the distributions to date is probably a small price to pay for the complete flexibility of taking whatever distributions are needed in any year, or not taking any, such as when she gets another job, or starts SS at 62, or at 60 if a widow.
Being stuck in a SEPP for 5 years until 64 normally makes no sense. I know that I would have recommended that she take whatever she needed until 59 1/2, and pay the 10% penalty.2009-09-01 00:18, By: dlzallestaxes, IP: [72.78.110.230]

Table of Contents