L1: Cash IRAI have 2 IRAs and I will be 52 this year. These are with Schwab. I spoke with my Scwab advisor about setting up a 72t. The one IRA has only cash in it-$92,000. The other IRA has $500,000. He said we would set up the IRA on the one that has the $92,000 in it. That doesn’t make sense to me. If I put in the calculator $100,000, I could draw about $4,000 a year and I said that I wanted $24,000 a year. He said that was doable-what am I missing? And should you set up a 72t with an IRA that has only cash? Thank you.2011-03-11 02:08, By: cat, IP: [220.127.116.11]
L2: Cash IRAGet a new “advisor”, either at Schwab or elsewhere, who understands SEPP 72-T plans.
It does not make sense to have just cash in any IRA, unless you are planning to take a complete distribution within a month or 2.
IRA’s are a place for investments to grow tax-deferred until you need to take distributions. You can take distributions from IRAs or SEPP 72-T plans either in cash, or in kind. Usually people set up SEPP 72-T plans because they need cash flow, and therefore you want want the liquidity of having cash to distribute when you need it, even monthly. You could have 2 IRA accounts as your SEPP 72-T “universe”, and take distributions from just 1 of them, but that is not the usual structure.
We recommend that you determine your annual cash needs, and then use the “reverse calculator” on this site to determine how much you need in your SEPP 72-T plan. Then transfer any excess into a separate “reserve” account for emergencies.2011-03-11 02:52, By: dlzallestaxes, IP: [18.104.22.168]
L3: Cash IRAI think the Schwab advisor was referring to the concept referenced in the last sentence of dlz’s second paragraph. The advisor probably meant to include both accounts for purposes of calculating the 72t distribution, but then to only take that distribution from the account holding the cash. This can be done and does not violate any 72t requirements.However, there are other issues in this situation. As dlz suggested, you need to determine the annual distribution needed to fund your expenses for the term of your plan, and if your IRA totals produce MORE THAN that amount, then you should transfer the excess value into another IRA account that is NOT part of your plan. You can use that later for emergency needs where you could take distributions without busting your plan. Whether you then have 2 accounts or 3 accounts is up to you, but there is probably no need for 3, just the one for the 72t and the other non 72t emergency account.2011-03-11 03:41, By: Alan S., IP: [22.214.171.124]