going back to work
L1: going back to workHello, I am in the middle of a 72T plan and have decided to go back to work full time. Can I continue the 72T withdrawals and not bust the plan? Just making sure……thanks!!!2011-06-24 02:01, By: TheresaM, IP: [18.104.22.168]
L2: going back to workIf you don’t keep taking the withdrawals you WILL bust the plan, so keep on going, or plan to potentially be told that you owe the 10% penalties on all withdrawals up to now, along with interest on the older ones. KEN2011-06-24 02:50, By: Ken, IP: [22.214.171.124]
L3: going back to workOk, I will surely continue the plan . Just wondering if me going back to work would throw up any red flags to the IRS. Have you ever heard of anyone doing this?2011-06-24 02:57, By: TheresaM, IP: [126.96.36.199]
L4: going back to workSEPP plans can be started while you are working, if desired. There is no problem with starting working again while one is running, except the company’s tax table will not take enough out for your combined “earnings” when SEPP withdrawal is included, so you may need to have addit taxes withheld at work. I have heard of people going back to work while a SEPP is running.
If you have used either AMORT or ANNUIT method for your SEPP plan, and the job ends up beingsecure, you can switch over to RMD method starting the next calendar year to reduce your IRA withdrawals under SEPP. It has to be recomputed (for each year’s withdrawal) using the 12/31/yy balance for the year yy + 1 withdrawal, as an example. If you later lose that job, you cannot switch back the other way to what you had done when you started, so be cautious. Ken2011-06-24 03:09, By: Ken, IP: [188.8.131.52]
L5: going back to workWhew! Thanks! I am always cautious and wanted to be sure. Thanks for the exra info.2011-06-24 03:18, By: TheresaM, IP: [184.108.40.206]
L6: going back to workJust FYI – if you opt to do the one time switch to the RMD method next January, and your account balance is about the same as when you started your plan, you should see a reduction in your annual distribution of very roughly 40%. Your plan will still end on the original modification date.
As Ken indicated, you cannot switch back, so if you lost the job you might be stuck with an insufficient amount of annual distributions and that might force you to take out more and bust the plan. So carefully weigh your desire to preserve retirement assets vrs. the adequacy of a reduced payout vrs. the amount of time left for your plan to run before doing the switch.
But working itself is totally immaterial to the validity of your plan. It usually just means you will have more taxable income to report.
2011-06-24 04:20, By: Alan S., IP: [220.127.116.11]
L7: going back to workYou could calculate the cost of the 10% penalty on what you have already withdrawn vs. the possible higher tax on the withdrwals if they push you into a higher tax bracket. The basic income tax may be the same if it does not push you into a higher tax bracket, in which case you could just put the withdrawals away for any future emergency.
However, if you are married, when you or your spouse dies, the survivor could be in a higher tax bracket as a single, rather than joint.
Once you reach the latter of 5 years or 59 1/2, then you can stop the withdrawals because you SEPP 72-T plan ends.
If you give us your date of birth, starting date of your plan, withdrawals to date, original plan balance, and current balance, we can help with the calculations, and our thoughtsas to what we suggest.2011-06-24 15:27, By: dlzallestaxes, IP: [18.104.22.168]
L8: going back to workI will need both incomes from the job and the 72T because I want to save for two new vehicles, and also beef up my emergency fund which is my only taxable account . If/when inflation goes up, I will need some of my emergency fund before my 72T plan is up. Therefore, I do not plan on changing to the minimum distribution or dropping the plan and paying the penalty vs paying taxes.2011-06-24 22:37, By: TheresaM, IP: [22.214.171.124]
L9: going back to workIt’s your money, but I would not use retirement money to “save for 2 new vehicles”,especially when you have to withdraw 33 1/3% more than you need in order to provide for the federal taxes at 25%. (i.e. if you need $ 21,000 you have to withdraw $ 28,000 which will be $21,000 left after you pay the $ 7,000 federal income tax).
Why wouldn’t you get a car loan, or better yet, a home equity loan or line of credit, where the interest would be tax deductible ? If you use the car(s) for business as a self-employed, then the car interest is deductible on your Sch C.2011-06-25 03:19, By: dlzallestaxes, IP: [126.96.36.199]
L10: going back to workI guess I failed to explain very well. I would not be making withdrawals for the vehicles from retirement money. I have an after tax account that I use for emergencies. Going back to work , I would beef up that account with my wages, and buy the cars after I have substantial money in this after tax emergencyaccount, and would not buy the vehicles until the account has much, muchmore in itthan the vehicles would cost. I have checked online of credit orhome equity loan, and we cannot get one because our house ( new and paid for) is in the middle of our large ranch. They only will do this with residential homes.2011-06-25 18:50, By: TheresaM, IP: [188.8.131.52]