Distributions to new 72t

L1: Distributions to new 72tI intend to take my pension, combine it with part of my 401k and set up a 72t with Edward Jones. I am wondering about the particulars of the transition and how that happens. As I understand it, the 401k that comes to me will be a payment in my name with 20% tax removed (I am over 55 year old, so no additional 10% penalty). The other part of the 401k would go to Edward Jones as a payment into a IRA, along with the payment from my pension. Both of those payments will be in Edward Jones name. Here is where it gets fuzzy for me. Edward Jones will take those IRA payments and set up a 72t and a regular IRA for me.
Is there anything to be concerned about in the transfer of funds? Do you have to initially target a 72t account during the distribution cycle, or does Edward Jones gather up the funds and then distribute into a 72t. I don’t see it working any other way but I wanted to make sure.2011-03-25 11:30, By: 72tnewbie, IP: [68.53.255.177]

L2: Distributions to new 72tIf you haven’t done so already, start by reading our planning pointers at http://72t.net/72t/Planning/PointersSince you are responsible, and not Edward Jones,make sure that you understand the full process. Don’t make the very bad assumption that Edward Jones will take care of everything.If you were over age 55 at your termination of employment, talk to the 401(k) Plan Administrator. If they will make periodic distributions to you, then there is no need to use those funds as part of the SEPP. Merely make periodic distributions from teh 401(k). In fact,depending on the amount in the 401(k) and your needs, you may want to leave the pensionalone until a later dateand only use the funds in the 401(k) until you need/want the pension funds.2011-03-25 12:07, By: Gfw, IP: [24.148.10.164]

L3: Distributions to new 72tSTOP !!!Before doing anything, follow gfw’s suggestion. Contact your fromer employer to see if you can make priodic withdrawals from your 401-K. If so, since you were 55 when you “separated from service”, then there is no need to transfer your 401-K to an IRA. You can take distributtons from401-Ks before 59 1/2 and no be subject to the 10% penalty for early distributions. If that provides enough for your needs until you are 59 1/2, then that would be my suggestion.Separately you can transfer other retirement funds into an IRA, but can delay setting up a SEPP 72-T in case you will not need one, or separating your IRA funds into 2 separate accounts, one for only the amount that you will NEED for now to supplement the 401-K withdrawals, and another account for future emergencies or an additional SEPP 72-T.2011-03-25 14:25, By: dlzallestaxes, IP: [96.227.217.194]

L3: Distributions to new 72tGFW made some critical points for you to follow, and I want to add one VERY critical item.If you do proceed with the IRA Rollover to Ed Jones, use the “Trustee-to-trustee” transfer method. The Jones rep can help you with the paperwork. This method will avoid ANY tax withholding and 100% of your funds will transfer from the K-plan & pension plan into the new IRA(s). If you have initiated the distributions directly to you which will trigger the 20% tax withholding, try as hard as you can to stop it! If you haven’t initiated the distributions directly to you, DON’T!! Follow GFW’s advice before doing anything else. BTW, if you do have to deal with the 20% tax withholding and you don’t have that money in a non-IRA / qualified plan account to add to your new Jones IRA, then those dollars will constitute a taxable distribution to you in the year of distribution.Jim2011-03-25 14:30, By: Jim, IP: [70.167.81.119]

L2: Distributions to new 72tGfw said:
If you were over age 55 at your termination of employment
Please Note: The waiver of the 10% penalty for 401(k) withdrawals applies only if you were over 55 when you terminated from the company where the 401(k) was created. In your original post, it’s hard to tell if you were over 55 when you terminated from the company or if you left the company earlier and are taking a distribution from the 401(k) now that you are 55.2011-03-25 17:16, By: knupug, IP: [216.218.240.46]

L3: Distributions to new 72tYes, thank you. I understand that the waiver only applies to me if I am over age 55, which I am. And to the earlier posters:Thanks for the reminder to look at the Planning Pointers link. I have looked at it before, but I needed a review.At this point I have not retired. I am trying to put a plan in place. My employer is agressivelymaking changes in my pension program to limit their liablility. They froze the account several years ago, and now they are changing a key lump sum interest rate calculation so that I am losing a considerable amount from the account with each passing quarter.So, do I keep the job and the nice income, or retire early and lock in on my retirementfigures? It has been a difficult question to answer. My 401(k) plan does not allow periodic distributions. I wish it did. To use some of that money I will need to distribute part of it to me at the time I take the lump sum payment (the other part of it to a IRA). I am aware that 20% will be withheld and that all of that will be counted as earnings in the 2011 tax year. I need to do this to supplement the monthly 72t distribution and help ensure that I do not break the 72t down the road. I will check out the trustee to trustee angle. It is my understanding that as my 401(k)is distributed, I will receive two checks, one to me with my name on it, another with Edward Jones on it. Then Edward Jones will take that 401(k) check along with the lump sum check fron my pension and set up a 72t in the amount I requested, putting the leftover in a IRA.At the end of all this I expect to have a 72t IRA, and regular IRA, and$$$ from my 401(k) in a non-IRA account.Thanks everyone. I value your input.2011-03-26 11:57, By: 72tnewbie, IP: [68.53.255.177]

L4: Distributions to new 72tAnother option is to keep the job and max out my contributions to my 401k. However, the max allowable annual contribution tomy 401(k) will not cover my losses in the pension.2011-03-26 12:12, By: 72tnewbie, IP: [68.53.255.177]