Limit on # of 72t IRA”s?

L1: Limit on # of 72t IRA”s? Is there a limit on the # or size or 72t IRA”s that I can set up? Also, if I have multiple 72t IRA”s set up to make fixed amortization payments, can I change any or all of my multiple 72t IRA”s back to the minimum distribution method at any time? 2007-12-10 19:46, By: JLan, IP: [66.186.227.36]
L2: Limit on # of 72t IRA”s?There is no limit to size and number, but you need to decide not only how many IRA accounts compose your 72t, but how many different PLANS you are maintaining. If you document and treat various accounts as independent plans, then there is no reason why some could not be switched to the RMD method, and others maintained with the original assumptions.
If multiple accounts are considered part of a single plan, then they all must be changed if any one is changed to the RMD method. It is quite rare to have multiple plans that begin in the same calendar year. The more exotic your structure, the greater the chance for execution errors, and the more likely you will have to convince the IRS that you have a valid plan(s).
2007-12-10 20:58, By: Alan S., IP: [24.116.165.60]

L2: Limit on # of 72t IRA”s?The reason I would like to have multiple 72t IRA”s is so I could adjust the cash flow to meet my needs. I was thinking thatif I find I”m taking too much out, then I couldconvert some of the 72t IRA”s from a Amortization distribution to a RMD distribution to reduce the cash flow. If I find that I need more cash flow, I could create another 72t by rolling over funds from my 401k to another 72t IRA. Is there a problem w/ this strategy except for having to keep up w/ multiple accounts? I just want to have some flexibility in retirement to adjust my cash flow up or down such I can make it as tax efficient as possible and I don”t pull out tax deffered money when I don”t need it.Also, I”m confused by the term “PLANS” in the reply. What makes aindividual 72t IRA into a PLAN?

2007-12-14 17:18, By: JLan, IP: [66.186.227.36]

L2: Limit on # of 72t IRA”s?Everyone can get better advice/information if they would only give full information.
You asked about having multiple IRAs and multiple SEPP 72-T accounts. After a reply, and other postings after several replies, you tell us that you have a 401-K.
And you still haven”t indicated how old you are (DOB). If you are near 55, and planning to retire and separate from service with your employer in the year you are or will become 55, then we would all probably tell you about checking with your employer to see if you can take flexible distributions from your 401-k, and avoid any 10% penalty or even having to set up a SEPP 72-T.
Why do so many people want to “keep secrets”, and then wonder why they don”t get the right advice ????2007-12-14 17:43, By: dlzallestaxes, IP: [151.197.92.208]

L2: Limit on # of 72t IRA”s?Sorry, first time posting at this site and I wasn”t trying to “keep secrets”. I thought I was asking a straight forward question that didn”t require a lot of background to answer.
Here”s my situation. Have about $1MM in a 401k, 50 years old with a 49 year old spouse, and would like to retire now and need about $40k cash flow from the $1MM. So I”m looking for the most tax efficient, penaly free method to do this with as much flexibility as possible to make changes until I reach 59 1/2. To do this, I was thinking I would roll-over $600k out of my 401k into 6 – $100K Balanced Portfolio IRA”s (50% Fixed / 50% Equities)and set up each one as a SEPP 72-T and use the amortization method of withdrawl. If I understand it correctly, I can make a one time change from amortization to RMD per account so my reason for setting up so many seperate accounts is if I find that I don”t need $40k, I could convert one or more of those accounts to the RMD to reduce the cash flow w/o having a penalty. Also, if I would find I need more cash flow, I could roll-over more out of the remaining money in my 401k into a new IRA and set that oneup for 72-T distributions to increase my cash flow.
I would appreciate anyone”s feedback on the pro”s/con”s of this strategy and any suggested alternatives.2007-12-14 18:46, By: JLAN, IP: [66.186.227.36]

L2: Limit on # of 72t IRA”s?Hello, JLan:
I”m sure that you weren”t trying to keep any secrets. The rules / laws that surround 401Ks, IRAs, and 72t can be complex, though, so it is usually better to have more info available before answering what may appear to be a simple question but isn”t. Your situation can easily change what applies to your specific case.
That said, I agree that your plan is workable but in your quest for flexibility you may very well be adding needless complexity. I believe that you could probably split your 401K plan or IRAs into 2 or at most 3 parts and still retain sufficient flexibility to meet your needs.
By using the calculators on this web site, you can calculate how much money you need to have in your IRA to generate the $40k that you need each year. You could split your retirement assets such that this amount is placed in a well-diversified low-cost portfolio of mutual funds. Your 72t plan would be set up on this account and would supply you with your retirement income.
You will need to decide what asset allocation best fits your situation. For me, that turned out to be about 65-70% in stock funds, 20% in bond funds, and 10-15% in money market funds. The cash portion is important because it allows us to ride outthe usualdips in the market without having to sell stock fund shares at depressed prices.
The rest of your money could be placed in 1 or 2 other separate IRAs that could then be used to supplement your income should $40k not be enough. If you need some money for a 1-time espense, you could always take a distribution and pay the extra 10% tax due on just that distribution. Since this IRA would not have a SEPP on it, there would be no problem with busting your plan. On the other hand, if you need more money on a routine basis, you can always set up a 2nd SEPP on your smaller IRA account.
If it turns out that you don”t need as much money, you can either not start the 2nd 72t plan OR, if you have already started the 2nd 72t plan, you can convert one of your two SEPPs to the lower-paying RMD distribution method. You can only do this once, though, so be careful with it as it cannot be undone until the SEPP runs its course and is completed.
When my wife and I were considering early retirement, the question of “how much money do we need?” came up right away. We did not know for sure because wealways lived below our income and saved as much as we could. To find this out, we created a new bank account that we both referred to as “the house account”. While we both had our own bank accounts, this was a combined account that we used to pay all of our household bills. Westarted this by putting $1500 a month eachinto the account. After a few months, wefound that this was more than we needed, so we reduced it to $1400 a month and tried thatfor a while. That too proved to be more than we needed, so we reduced it again to $1300 a month. That proved just right and we have kept it there ever since. It is likely that we will need to raise this somewhat to compensate for inflation at some point but so far, so good. This account coversour basic living expenses but we also have individual expenses that we eachcover separately. This whole exercisetaught us both that while it may be difficult to know what all your expenses are and figuring a budget the conventional way is incrediblyboring, this method worked well for us. My living expenses are about $1800 a month and my wife”s are about $2200 a month. Since our retirement income is about 25% more than this and we have other assets not in our retirement accounts, we are fairly financially secure.
Ed2007-12-15 15:16, By: Ed_B, IP: [67.170.159.37]

L2: Limit on # of 72t IRA”s?We have addressed additional SEPP plans frequently here, as longer term plans frequently do not meet current income needs and if there are other IRA accounts available, additional plans can be started.
However, I cannot recall someone who actually wanted to start several independent SEPP plans during the same year, oreven simultaneously as Jlan seems to contemplate. There does not appear to be any requirementlimiting the number of plans started within a short time frame, and the various plans could elect the one time RMD switch at different times and if a plan was busted, the others would be unaffected.
However, there appears to be some circular reasoning with that strategy, since the added complexity and likely IRS and IRA custodian inquiries would appear to increase the chance of busting one or more of these plans through an oversight, even though the idea may present some insurance against a large penaltydue tobusting your only SEPP plan. It definitely would be a unique approach with theoretical merits that would probably be overcome by the added complexity and headaches.
The traditional approach of keeping IRA accounts in reserve for emergency purposes or later plans seems the better approach.2007-12-15 20:33, By: Alan S., IP: [24.116.165.60]

L2: Limit on # of 72t IRA”s?I agree with Alan and Ed. Except for the headache yourmulti accountgymnastics will create, your plan should work. However, let me toss out one question you need to answer before you do anything. Will you 401(k) plan allow you to use that account in the “piggy bank” fashion you are planning? Here”s what I mean:
Most K-plans will not allow the flexibility to withdraw funds in the random fashion you will need. Most will only allow a one-time distribution of the entire account balance either directly to you (wrong answer) or for an IRA Rollover account. The reasoning is quite simple: K-plan administrators are not set up to dole out funds on an “as needed” basis. IRA custodians are set up for this type of distribution.
Check with your K-plan administrator to answer this question first. The answer you get will direct the rest of your actions for SEPP Plan structure and operation.
Good luck.
Jim2007-12-17 08:38, By: Jim, IP: [24.252.195.14]