Can I make additional withdrawals after starting?
L1: Can I make additional withdrawals after starting?I have begun a 72(t) withdrawal process from Fairholme Fund and am wondering if that limits what I can do with my account? Am I limited to just my programmed monthly withdrawals, or could I, say, transfer some of the money to another fund as long as I continue the withdrawal process?
Thanks!2009-08-23 21:15, By: bill, IP: [220.127.116.11]
L2: Can I make additional withdrawals after starting?Bill:
When we commit to a 72t plan, we must not take more or less than the amount calculated for that tax year. We can vary the monthly or quarterly amount as long as the annual total is the same.
Generally, it is best to keep your 72t plan as simple as possible. Adding too many extra features to a plan is asking for trouble since complication usually increases the chances of making an error of somekind that can bust the plan.
Additionally, we must not move any other money into or out of the IRA upon which our 72t plan is built. If you have more than 1 IRA and one or more of them was not included in your 72t withdrawal calculation, you can take money from them. The 10% early withdrawal penalty taxwill most likelyapply to those extra withdrawals but at least you can get emergency funds that way.
2009-08-23 21:30, By: Ed_B, IP: [18.104.22.168]
L3: Can I make additional withdrawals after starting?Ed is exactly right. There have also been a couple cases where the IRS busted a plan for partial transfers of the SEPP IRA to another IRA. This has not happened with full transfers.
I am not familiar with this particular fund but some mutual fund companies put each fund in a separate IRA account. You could do a full transfer of that account. If you hold this fund in a brokerage account, then no problem with transfers since you can sell some of the shares and invest them in different funds or stocks all in the same IRA account. In other words, there is no distribution in that case and therefore no risk to your SEPP plan. You would have to determine what type of account platform you are in with the current holding.2009-08-23 23:29, By: Alan S., IP: [22.214.171.124]
L4: Can I make additional withdrawals after starting?You did not state your age or date of birth. We have to assume that you are not yet 59 1/2.
If you are saying that you have ONE IRA account, then you cannot take additional withdrawals above the calculated annual distribution limit.
If you are saying that you never used a calculator like the one that is on this website, then you probably do not have a valid SEPP 72-T plan.
If you decided an amount that you wanted to take out each year, and thought that qualified as a SEPP 72-T plan, you are wrong, and probably do not have a valid SEPP 72-T plan.
If you just realized that you do not your entire IRA account to justify the annual distribution, it is too late to split it into separate accounts so that you can use the excess for additional withdrawals, even though those would be subject to the 10% penalty.
If you give us all of the information needed about your situation, we might be able to give you an informed response.2009-08-24 03:28, By: dlzallestaxes, IP: [126.96.36.199]
L4: Can I make additional withdrawals after starting?Alan…
The thing about partial transfers that makes what little hair I have left stand on end is the uncertainty about what is allowed and what is not. This seems a place where a 72t plan owner could get into serious tax trouble, even with the best of intentions. You’ve mentioned PLR 2007-20023 before and its impact upon partial transfers but it looks as if the IRS has never made a definitive ruling on this issue. If so, then avoiding a partial transfer looks like a good way to avoid potentially serious taxproblems. Whatever possible benefits there may be to doing a partial transfer seem to me to be outweighed by the potential for disaster.
I agree with dlz as well in that the calculations necessary for calculating a valid SEPP plan distribution amountmust be exact. Calculators, such as are available in this web site, are excellent but it is also possible to calculate this long-hand. I did that and then used the calculator for confirmation. Vanguard had (has?) a brochure that walks a person through the calculations for the three IRS approved methods. It was pretty straightforward.
2009-08-24 04:57, By: Ed_B, IP: [188.8.131.52]