L1: combining IRAsOk I am starting a 72T. I plan on using a FidelityIRA account to distribute a monthly check of $7000. This account has a total of $1,460,000in it. I have a seperate IRA account with $ 244,000 in it NOT with Fidelity. While the combined total will allow the $7000 monthly withdrawl, The $1,460,000 will not at a 3.27% rate. I am 57 years old. Fidelity says since I do not have the total of $1,700,000 in their account, they will not do the calculation paperwork for me but I must do it on my own. While I realize I can do this, would it be easier, and less messy with the IRS, if I combine both Ira’s into Fidelity then splitthe total of $1,700,000 into 2 Fidelity IRA accounts using just one to run my 72T.I just want to avoid an IRS audit letter and having Fidelity say I am on my own since I did not have them calculate thesepp plan?Thanks2010-06-18 18:57, By: retiredguy, IP: [22.214.171.124]
L2: combining IRAsRetiredguy,
Did Fidelity say you would get a code of “2” (no penalty early withdrawal) on your 1099-R each year while under 59 /12 if they did the calcs? I’d ask them that as well. If not, you will have to file the 5329? form with your tax return anyway. If you started your first pmnt in JULY, you could still use the May 3.45% interest rate in your calcs, and you would need $1,489,678.68 in the account to supoort AMORTIZATION (assuming you are still going to be 57 as of 12/31/2010). That means you would have to only move appx $29,000 from other IRA tothe Fidelity one (by Trustee to Trustee transfer) before doing the calcs and getting starting balance. Ken2010-06-18 19:14, By: Ken, IP: [126.96.36.199]
L2: combining IRAsAgree with everything Ken said. One additional point, regardless of who does the calculations, you are always on your own – an IRA is between the IRA owner and the IRS.
From our Planning Pointers page…
It is your responsibility. Don’t assume that someone else is taking care of your plan. Check the calculations and make sure that in early December of each year you check to make sure that you will have received the total annual distribution for the year. There may be a 60 days window to rollover excess distributions, but there is no window to take additional fund out to meet the required annual payment.
Just keep good documentation and you shouldn’t have any problems.2010-06-18 19:24, By: Gfw, IP: [188.8.131.52]
L3: combining IRAsLet’s go back to your original posting ” WHILE I REALIZE THAT I CAN DO THIS ON MY OWN” From the thread of the discussion on your posting, it is obvious that you do not have a clue how to do this on your own !!!! Get professional help before you cost yourself a fortune in unnecessary taxes, interest, penalties, etc.By the way, have you spoken with your accountant about doing a ROTH CONVERSION in 2010 ????2010-06-18 21:21, By: dlzallestaxes, IP: [184.108.40.206]
L4: combining IRAsPerhaps” I do not have a clue” but I came to this forum to learn!Comments like yours seem to be a little harsh for someone looking for advice!2010-06-18 21:53, By: retiredguy, IP: [220.127.116.11]
L5: combining IRAsI apologize if you were offended, but better to be forewarned than make an expensive mistake. You might want to read all of the postings from others who thought they understood what SEPP 72-T was all about, only to find that a small misstep became an expensive lesson.For example, if you are married, and have reasonable life expectancy, you might want someone to do the analysis of using your non-IRA and IRA distributions instead of SS benefits until age 70, and get 175%of theSS benefits at 62 for the rest of your life, and then your spouse’s life is she survives you. There are many nuances to this analysis, as well as ROTH CONVERSIONS. If your investments are in equities/stocks/mutual funds, then all dividends and growth will be taxed at 25% or 35%, or higher, on distributions, when they would be TAX-FREE for your lifetime, your spouse’s, and your children’s and grand-children’sif they were in a ROTH IRA.Just something to consider as part of your RETIREMENT PLANNING.2010-06-18 23:15, By: dlzallestaxes, IP: [18.104.22.168]
L6: combining IRAsFidelity has a SEPP form that you download and fill out. You do an approximate calculation using the calculator on this or the Fidelity website. Fill out the form based on which calculation method you want them to use. They will generate a very nice printout showing exactly what parameters were used. Be well aware of what the current interest rate is and how/when to request the SEPP. You request the frequency your money is to be transferred (I use quarterly) Your final payout may be 5% or so different than your target.The Fidelityprintout will go quite a long way toward showing the IRS that your calculation is correct. Fidelity is NOT responsible if you screw up by making transfers in/out of the SEPP account or bust it.I am with PAS so have one person at Fidelitythat I talk to who is a Certified Financial Planner and will give advice on financial matters.(Note that while everything I am doing is exactly right, we are currently being audited, a common occurance for those using 72t.)I requested (and got) a letter from Fidelity saying they always code the 1099 forms as “no exception”2010-06-19 04:01, By: JB, IP: [22.214.171.124]
L7: combining IRAsWe also have a sample form at http://72t.net/72t/Sample/Form that will allow you to outline your plan and it’s specifications. 2010-06-19 12:15, By: Gfw, IP: [126.96.36.199]
L8: combining IRAsRetired guy,One more thing. By the time you transfer the amount you determine is needed to get exactly $84,000 per year from your calcs, the balance in your original account could go up or down while transfer is happening, and your new calc (using the new balance after the transfer arrives) could end up slightly over or short of your $84k/yr goal. I would just go with the correct figure from the calcs, knowing that it is as close as you could get to the $84k/yr you wanted. I also recommend that you make the plan start in latter part of July to take advantage of that higher MAY interest rate, so more money can be left in the other IRA, that you can “tap” once you get to be 59 1/2 without penalty, while 72t plan runs on the Fidelity IRA. I think if you want monthly payments earlier in the month, you could ask Fidelity to get first payment out in July, and then switch payment date to the 5th of the month starting in August. It would also be easier to remember that in first year, you got 6 payments ($42k if you can make that $84k figure work) or 1/2 of the full year amount of the future years. Just something to think about. KEN2010-06-19 13:00, By: Ken, IP: [188.8.131.52]