Change of Distribution
L1: Change of DistributionI have been receiving a 72T distribution in the amount of $3300/yr. At this point in time the IRA will be depleted prior to reaching age 59 1/2 due to market losses. I would like to reduce the distribution to 1000/yr or less to insure that the account will last until I reach 59 1/2. I am 50years old in 2009. Is there any paperwork that needs to be filed and if so what and where might I find it, thank you.2009-07-01 21:53, By: johnnyg, IP: [184.108.40.206]
L2: Change of DistributionIt may be too late to make any change this year.
Take the balance as of 12/31/08, use the calculator and select the Minimum Distribution method. If you have taken out more than the calculated amount, you can roll back amounts taken in the last 60 days. If you still exceed the amount, you would have to wait until next year.
With that said, you can not arbitrarily change the distribution amount (other than as out lined above) without busing the plan and paying the 10% penalty plus any interest on the penalties for all prior distributions.
The positive… there is no penalty if the plan’s assets go to zero.
2009-07-01 22:02, By: Gfw, IP: [220.127.116.11]
L3: Change of DistributionGfw
Many thanks for the useful information.
1. I haven’t taken a distribution yet this year, normally I do it in December.
2. I understand that I need to re-calculate the remaining balance in 12/31/08 and then establish a distribution.
3. Lastly, any required paperwork??
Many thanks2009-07-01 22:10, By: johnnyg, IP: [18.104.22.168]
L4: Change of DistributionNo. Just keep good documentation in case of an audit – cross all the ‘t’s and dot all the ‘i’s.2009-07-01 22:14, By: Gfw, IP: [22.214.171.124]
L5: Change of DistributionGfw
Understood, last question….can I use May interest rate and if so do I need to get the distribution prior to 31 July.
Thanks again for all the help
jg2009-07-01 22:25, By: johnnyg, IP: [126.96.36.199]
L6: Change of DistributionNo interest rate is used in the Minimum Distribution method. Just remember that you have to recalculate each year once you make the switch.2009-07-01 22:29, By: Gfw, IP: [188.8.131.52]
L7: Change of DistributionSince you will be working with such a small distribution after the one time switch, you might check into the advantage of simply continuing the current distribution and letting the account exhaust itself. As gfw indicated, there is no penalty for this. Otherwise, you will face 9 more MD calculations and if you blow any of them later down the line, the relative amount of penalty and interest to the distribution amountwill be rather large.2009-07-02 00:37, By: Alan S., IP: [184.108.40.206]
L8: Change of DistributionWhen did you start taking SEPP distributions? Like Alan said, your distributions are relatively small. You might think about “busting” the plan now and paying the penalty and interest if it’s only been running for a couple of years.
Jim2009-07-02 13:29, By: Jim, IP: [220.127.116.11]
L9: Change of DistributionJim
Thanks for the note, I have been taking a SEPP for 15 years.
Given the input from Gfw and others I may just stay with the distribution and deplete the plan within the next three or four years as it will be one less account to maintain.
Thanks again for your comments.
jg2009-07-02 15:31, By: johnnyg, IP: [18.104.22.168]
L10: Change of DistributionOUCH! Since this has been running for 15 years I concur that your best option is to just let it run dry.
Jim2009-07-02 15:46, By: Jim, IP: [22.214.171.124]