Can I start two 72t’s in 2010

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L1: Can I start two 72t’s in 2010Can I start more than two 72t plans in the same calender year?
I started my first 72t plan on a $200k IRA in January 2009. I want to start a second 72t on a $450k IRA in January 2010. Unfortunately the midterm rates remain very low and my unemployment is running out so it might be be best for me to split the $450k into two parts. Then I could start a 72t on some of it in January 2010 and start a third 72t later in 2010 after mid-term rates rise.
Do you see a flaw in this plan? I am 52. I would rather make it to social security age with only two 72t plans to keep life simple. Unfortunately, I am in a squeeze now that could be solved by Ben Bernake if his “extended period” was only two or three months. I use Vanguard and they don’t consult on 72t rules.
Thanks for any thoughts. Does anyone think rates will rise in the first half of 2010?2009-11-30 16:38, By: Telcoguy, IP: []

L2: Can I start two 72t’s in 2010You can start as many plans during the same year as you want to, and in the same or different months. I don’t think the chances of error increase proportionately with your number of SEPP plans, ie. there is probably more risk with your first plan than with your second. Since each plan is totally independent of the others, if you make an error with 3 plans going, your penalty will only apply to the plan with the error. Of course, there is some risk of making the same error on all the plans, whether the error occurs with the original calculations or some executory error in taking the correct distributions over the years.Since market forces affect the midterm rates, it is tougher to predict rate changes than if actual fed moves were the only factor. Before the fed increases, they will change their language in the meeting notes, and the markets will react to that. It’s HOW the market will react that is very tough to predict. One element of flexibility you have is to distribute the full annual 2010 distribution for any plans that you start at any time during 2010, but you also apparently need to squeeze out the max for your totalIRA balancefor 7 years. Health insurance may turn out to be one of your largest expense headaches. You may want to wait and see what the reform bill produces in the way of any subsidies to purchase insurance and whether any subsidy would be based on earned income or more likely, on AGI. If it’s on AGI, then probably no subsidy due to the SEPP distributions.My take is that tight budgeting will benefit you much more in the long run than a few basis point changes in the interest rates, but there is no serious flaw in going to a third plan. Just be very careful in whatever you do to avoid any errors, and that would be equally true with only a single plan. With Vanguard you will be filing a 5329 every year to claim the exception. You do not need one for each account, but the total dollars you show for the exception should equal the sum of the appropriate 1099R forms.2009-11-30 20:28, By: Alan S., IP: []

L3: Can I start two 72t’s in 2010Alan
Thanks for the ideas.
When I am rebalancing or creating my IRAs on the Vanguard web page I have to be very careful to keep the fund exchanges within the targeted IRA. It is possible to accidentally move funds in or out of the IRA that is under 72t rules. I asked Vanguard if they could partition it off. They offered to freeze it, but then even I would have no access to it without special steps.
I neeed to get my 2nd 72t IRA just right because it is a 7 year commitment. I think I will wait it out. Let the rates move closer to normal. Then I can commit a good size chunk of my IRA into another 72t.
Thanks again.
2009-12-01 14:23, By: telcoguy, IP: []

L4: Can I start two 72t’s in 2010>>It is possible to accidentally move funds in or out of the IRA that is under 72t rules.Short answer… No. If you add any additional funds, even by accident, you will bust the plan.2009-12-01 14:34, By: Gfw, IP: []

L5: Can I start two 72t’s in 2010
I had to do a double take at the Q & A for this thread. My initial take was that the OP was asking if it was possible, not permissible, to mistakenly transfer funds from a non-SEPP IRA into a SEPP IRA, and presumably vice versa. As far as I know, there are no barriers that would prevent this. For obvious reasons, I have not tried this with my Vanguard accounts, one of which is an IRA with an active SEPP.

As Gfw notes, any addition to an IRA while a SEPP is running will bust the SEPP, as will any distribution other than the exactly calculated amount. Only changes in value due to market ups and downs, the calculated distributions, and the usual custodial fees are allowed without busting the SEPP.

All that said, there was the Benz v. Commissioner tax court case in May 2009, wherein the court found that money removed from a SEPP IRA did not bust the SEPP because that money was used for higher education expenses and had its own exemption from the 10% early withdrawal penalty tax. See: for additional details.
2009-12-01 17:05, By: Ed_B, IP: []