Lump Sum Distribution after taking Systematic Peri

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L1: Lump Sum Distribution after taking Systematic PeriAfter reading Kim’s Question of 3/13, I need some clarification so I don’t run into the same dilemma.

Facts:
Took early retirement Sept. 2006 at age 56

Will be 59 _ in June 2009

Started systematic withdrawals from company 401k January 2007 Plan allows partial withdrawals (equal amount) on a monthly basis, plus an additional (1 per calendar year) withdrawal for any amount.

My plan was to continue the monthly payout until Dec. 2009 (age 60) & then rollover the remaining amount in the 401K as a Lump Sum to a Traditional IRA in January 2010. Now after reading Kim’s question, seems I need to do the Lump Sum Rollover after June 2009 when I turn 59.5, but before July’s schedule monthly withdrawal is that correct? Or can the Lump Sum Rollover be done anytime before Dec. 31, 2009.

Also, in reading response to Kim’s question I will not be able to do this in 2010 as originallyplanned or at anytime afterDec. 2009is that correct?

meb242008-03-16 13:10, By: meb24, IP: [68.45.185.149]

L2: Lump Sum Distribution after taking Systematic PeriOf course, these concerns about lump sum distributions ONLY apply if you want to utilize NUA.
Assuming that you have NUA potential in the plan, the LSD must qualify for NUA utilization. That said, I am not aware that the IRS has clearly defined if they consider an intervening distribution to be only those distributions in a separate year between the triggering event and the LSD, or ANY distributions after the triggering event regardless of year. In order to prevent raising this question either with the IRS or by the way the plan administrator codes your 1099R, I would suggest terminating the systematic distributions with the month prior to turning 59.5. Then immediately after turning 59.5, get your NUA quote and decide about how much of the employer stock will be allocated to NUA and how much sold or rolled over. Then complete the LSD well before year end. You might have a couple months without the monthly income to get this all done, but it should eliminate any doubt regarding intervening distribution problems with the LSD.
Of course, the other criticalchallenge is to get the balance of all plans of a similar type out of the company plans prior to year end.
2008-03-16 14:01, By: Alan S., IP: [24.116.165.60]

L2: Lump Sum Distribution after taking Systematic PeriThanks Alan S
NUA will not be a factor here.
My plan was to remove it from the 401k for better investment options after 59.5 & withdrawals as needed without penalty (which I couldn”t doin a TIRA withoutsetting up a SEPP & be locked in for 5 years),but was going to wait until end of 2009 todo so, but got nervous after reading Kim”s post.
Does there have to be a triggering event for me to remove/close out the 401ke.g 59.5? Actually, can I roll it over to an IRA before 59.5?My spouse will be 59.5 this year & we could make withdrawals from his accounts to replace my systematic withdrawals if necessary. I thought I had to continue with this until at least 59.5, but now I”m confused.
Thanks,
meb242008-03-16 14:59, By: meb24, IP: [68.45.185.149]

L2: Lump Sum Distribution after taking Systematic PeriWith NUA not a factor, you do not have to worry about triggering events etc. The whole discussion with Kim was based on utilizing NUA with all of its contingencies.
In your case, you can transfer it to an IRA anytime you want. All you need to be aware of is that you cannot withdraw from the IRA without penalty prior to age 59.5 without a SEPP, and it would not make sense to consider a SEPP when you can easily avoid it. The periodic withdrawals have worked well for you, and I assume they are being coded with the age 55 separation exception code in Box 7 of the 1099R.
When you move it to an IRA, of course do it by direct rollover to avoid withholding. You may also wish to keep it in a separate rollover IRA to maintain unlimited bankruptcy protection if you think that would be an issue.2008-03-16 22:00, By: Alan S., IP: [24.116.165.60]

L2: Lump Sum Distribution after taking Systematic PeriWith NUA not a factor, you do not have to worry about triggering events etc. The whole discussion with Kim was based on utilizing NUA with all of its contingencies.
In your case, you can transfer it to an IRA anytime you want. All you need to be aware of is that you cannot withdraw from the IRA without penalty prior to age 59.5 without a SEPP, and it would not make sense to consider a SEPP when you can easily avoid it. The periodic withdrawals have worked well for you, and I assume they are being coded with the age 55 separation exception code in Box 7 of the 1099R.
When you move it to an IRA, of course do it by direct rollover to avoid withholding. You may also wish to keep it in a separate rollover IRA to maintain unlimited bankruptcy protection if you think that would be an issue.2008-03-16 22:00, By: Alan S., IP: [24.116.165.60]

L2: Lump Sum Distribution after taking Systematic PeriThanks again AlanS –
Just when I think I understand all the quirks of these plans – I read something that soundssimilar to my situation & think”OH MY!” it”s not how I thought it worked. Glad Kim”s situation was actually different with the NUA issue.
Yes, Withdrawals are coded with “2” exception.
I”ll go back to my original plan to keep monthly withdrawals till end of 2009 then “direct rollover” remainder (“IF ANY IS LEFT”) January 2010 when I”ll be 60.
Thanks, meb24

2008-03-17 07:35, By: meb24, IP: [68.45.185.149]