Custodial change on 72(t)
L1: Custodial change on 72(t)
If I have a 72(t) with a custodian, say American Funds, and I am now 57. I have been drawing from it for 4 years. I realize I must wait until 59.5 to change this distribution or stop it. I, however, would like to change the custodian and/or investments
on the account…
1) Can I do this?
2) I will keep the same payment coming as before, so only changing the custodian and investments… Will this cause me to have to file a 5329 and not let them continue to code it as 72(t)?
I have received conflicting responses. My belief is, that if the new custodian will accept the account and I continue the same 72(t) payments, that I should be ok? Keep in mind the account is under water.. the amount I have to take out now is closer to
11.5% of the total balance because of market performance. Will this decrease the likelihood of a custodian accepting it? Thanks for any guidance.
2011-11-23 16:58, By: CDD, IP: [18.104.22.168]
L2: Custodial change on 72(t)
1. You can change custodians without affecting the plan, but I recommend doing it electronically.
2. You can change investments without affecting the plan, and it can be done at the current custodian.
3. Your plan is not “under water”. That term is used when the balance is less than the amount owed, which is most common with real estate investments.
4. Did you select the investments, or did a broker/advisor based upon your “risk tolerance” and goals ? Possibly this, and the stock market volatility are the reasons for your displeasure, and desire to change.
5. If you “run out of money” in your SEPP 72-T, there is no penalty. The fact that you might deplete your balance, or reduce it more than you had planned, is not a problem from a tax standpoint.
6. You can significantly reduce your annual distributions by making a 1 time change to the other method, if you can live on possibly 40% less being distributed for the next 2+ years until you are 59 1/2.
2011-11-23 19:14, By: dlzallestaxes, IP: [22.214.171.124]
L3: Custodial change on 72(t)
On your first recommendation, “do it electronically,” how is this accomplished if the new custodian wants paperwork sent?
2011-11-24 20:06, By: stat, IP: [126.96.36.199]
L4: Custodial change on 72(t)
Do the paperwork in the form that they require and then do any transfer of funds electronically. And yes, if you transfer custodians you will probably need to file a form 5329 to claim the exemption. Merely changing investments in the current account should
not trigger any changes in 1099 reporting.
2011-11-24 20:46, By: Gfw, IP: [188.8.131.52]