Busting 72t distributions

L1: Busting 72t distributionsFirst of all let me thank all the contributors to this site for educating me on 72t distributions. I learned more here on this subject than the several meetings I had earlier this year with a CFP.
In March, I rolled my 401K and company retirement plan into an single IRA and established SEPP distributions using 120% of Jan. mid-term rates (4.12%). At the time I devoted most of my time in deciding how to invest the money and not on the total tax implications of taking money out of the IRA. In the last few months I have had a chance to examine my current and future tax situation and using what I have read at this site I have come to the conclusion that I should have split the money into multiple IRA accounts before setting up distributions. I now think I should go ahead and bust the 72t, pay the 10% penalty and setup a more tax efficient structure to the funds. However, this time before I do anything I would appreciate it if the contributors to this forum could review my logic and point out any flaws you see.
My reasons for deciding to break the 72t include:
1) The IRA balance has substantially increased with this years market recovery.
2) I hope interest rates will continue to climb well beyond the rate I used in March.
3) I have substantial medical expenses that could exempt additional withdrawals from a 10% penalty.
4) Current payments leave me in the zero percent tax bracket with unused deductions.
5) I have over 8 years left of distributions and any significant increase without penalties in those years would more than offset the 10% penalty so far this year.
6) The current distributions are not enough to cover my expenses and I am using post tax funds to make up the difference.
My goal is to minimize taxes while maximizing current income from the IRA funds until other retirement income streams start in the next few years. With this in mind I am leaning towards breaking the IRA up into 4 separate accounts. One account will be used to withdraw money to cover medical expenses in excess of 7.5% of income as well as for emergencies. The other three accounts I thought I would establish SEPP distributions at various times next year in hopes of taking advantage of rising interest rates. If interest rates don’t increase early in the year, I could also use the non-SEPP account to supplement post tax funds and prolong the period before fixing the income streams.
I’m sorry for the long post but I thought I would try and get all the details out on the table. Thank you for all your help.
Regards,
Fred2003-10-10 13:03, By: Fred, IP: [127.0.0.1]

L2: Busting 72t distributionsHello Fred:
The old expression “measure twice, cut once” comes to mind. In the case of SEPP plans simply substitute “thrice” for “twice”. I find no fault with your logic as it fairly complements the issues I often discuss with clients. Also, I would suggest you stop your 2003 distributions immediately so as to minimize your penalties in 2003. Lastly, you may be completely competent to financially re-plan 2004 – 2012; if so, go for it. If not, get some financial help as the help will always cost a lot less than the penalties.
TheBadger
wjstecker@wispertel.net
2003-10-10 13:17, By: TheBadger, IP: [127.0.0.1]