Change annual date of distribution?
L1: Change annual date of distribution?
Hi. DOB 9/1/62 first lump sum (annual) distribution March of 2018. Is it ok to change the date of your annual distribution if amount of annual distribution stays the same? For example, my first lump sum was distributed in March of 2018. I would like to take the remaining 4 distributions in January of each year vs. March. Is it ok to make that change?
Thanks in advance for your guidance.
2018-12-29 18:53, By: chelroe, IP: [188.8.131.52]
L2: Change annual date of distribution?
Yes, you can make that change. Your distribution pattern during the year is not limited. The only requirement is that your total calendar year distributions as reported on your 1099R and tax return equal the exact amount of your 72t plan calculation.
That said, by taking out the full annual in January, you will not be able to distribute any more from this IRA in 2019 without busting your plan, so there is more pressure to budget your expenses very carefully to avoid running low late in the year.
2018-12-29 23:41, By: Alan S, IP: [184.108.40.206]
L3: Change annual date of distribution?
Even if you take subsequent “annual” distributions in January, your plan will not end until 60 months after your first one in Mar. 2018, i.e. 3/2023.
2018-12-30 01:55, By: dlzallestaxes, IP: [220.127.116.11]
L4: Change annual date of distribution?
Thank you for that reminder. To clarify, does that mean I have to take the exact full year lump sump again in 2023 to not bust the plan or, can I calculate the exact amount that 1/4 of the annual payment would be (January through March 2023) and then move forward as I see fit?
Thanks again for your help.
2018-12-30 17:57, By: chelroe, IP: [18.104.22.168]
L5: Change annual date of distribution?
You have a 5 year plan and 5 years of distributions will be completed at the end of 2022. It is safer to NOT take any distribution in 2023 until after the plan ends. If you were desperate for funds in Jan or Feb and distributed a full annual or 2/12 of the annual calculation the IRS would probably not bust the plan, but there is some risk so better to plan on no distribution in 2023 until after the plan ends.
2018-12-30 18:50, By: Alan S, IP: [22.214.171.124]
L6: Change annual date of distribution?
This is an area of constant confusion.
Your plan lasts at least 5 years = 60 months. It is not 5 annual payments (which could be 49 months if you took an annual distribution initially in March 2018, and then annually in January 2019, 2020, 2021, and 2022).
Therefore, the 60 months takes you to March 2023.
You do not have to take any distribution in 2023. You are allowed to take 1/4 of the annual distribution in 2023 before the 60 month anniversary (to the day) of your initial distribution. We recommend that you not take that 1/4, if possible. It is safer to just wait until April 1, 2023 to take any amount that you want at any time and in any amount that you want to.
2018-12-30 20:48, By: dlzallestaxes, IP: [126.96.36.199]
L7: Change annual date of distribution?
Thank you for the clarification! It is a bit confusing. Happy New Year!
2018-12-31 17:03, By: chelroe, IP: [2602:304:cdd8:4fc0:990a:b9f5:d457:b67e]
L8: Change annual date of distribution?
Not really confusing. You have a 5 year plan which is different than a typical SEPP.
Very simply you can the equivalent of an annual distribution for each of the 5 years – no more and no less. From the date of the 1st distribution, the date the SEPP will end is 5 times 365 days + 2 days to account for leap year.
2018-12-31 17:16, By: Gfw, IP: [188.8.131.52]