Minimum IRA Balance for 72T

L1: Minimum IRA Balance for 72T
I am clear on how to calculate the annual payments for a SEP but I am not clear on the minimum IRA funding requirements. For example if my SEP calculation shows a $30K annual withdrawal based on an IRA of $540K do I actually have to maintain this $540K balance?2008-12-10 15:17, By: RDT, IP: [98.221.230.237]

L2: Minimum IRA Balance for 72TNo. It is merely the inital balance required at today’s interest rate to produce a constant annual distributin of $30k. If interest rates change before you start your plan, it may require more (rates go down)or less (rates go up).2008-12-10 15:26, By: Gfw, IP: [98.214.144.242]

L2: Minimum IRA Balance for 72TSo I make my first withdrawal and then 1 month later my IRA balance goes to $490K and then a year latter it is down to $155K. Besides being stupid and very broke is my 72T still valid and can I continue to withdraw $30K per year for the 5 year period.2008-12-10 15:35, By: RDT, IP: [98.221.230.237]

L2: Minimum IRA Balance for 72TYour plan remains valid as long as you distribute the 30,000 for the term of the plan regardless of fluctuation of the IRA account balance. In the worst case scenario, if your IRA runs totally out of funds, you are not considered to have violated the plan. The plan simply ends.One tool to consider is that if you do not need the 30,000 to live on, you can make a one time switch to the RMD method, which results in a much reduced annual distribution. But if your IRA balance dropped substantially and you switched to RMD, your calculation might result in your 72t annual distribution dropping so low that you could not live on it, and would be forced to bust the plan. So do not use this tool to preserve IRA assets unless you can afford the reduced distribution. The one time switch does not change the term of the original plan.2008-12-10 15:59, By: Alan S., IP: [24.116.165.60]

L2: Minimum IRA Balance for 72TMathematically, yes. If your value declines significantly, you would be required to continue to withdraw the same $ 30,000 per year until the remaining balance was less than $ 30,000, in which case you would withdraw the balnce. But in such a situation you will not have busted the plan, but you would probably be busted financially.2008-12-10 18:23, By: dlzallestaxes, IP: [96.245.168.66]

L2: Minimum IRA Balance for 72TThanks for the replies. I understand that issue. Last question. When I start the 72T can my initial IRA balance be several hundred thousand higher than the amount needed to calculate $30K per year. I know the downside of that is that money is frozen from withdrawal other than the 72T for 5 years but that does not bother me. So the question is if I have an IRA balance the calculates out to $45K per year can I just withdraw $30k per year for 5 years.2008-12-10 18:38, By: RDT, IP: [98.221.230.237]

L2: Minimum IRA Balance for 72TI believe that the regulations only set a maximum interest rate for the calculation, but not a minimum rate.However, based on the recent stock market “crash”, why would you ever want to put in more than necessary, and lock it in for 5 or more years ? You never know when an emergency might arise that requires additional funds. Nothing is forever, not your job, business, investments, marriage, ability to earn a living, health, etc.2008-12-10 18:44, By: dlzallestaxes, IP: [96.245.168.66]

L2: Minimum IRA Balance for 72T>>So the question is if I have an IRA balance the calculates out >>to $45K per year can I just withdraw $30k per year for 5 yearsRDT… Short answer is NO. What you can do is divide the IRA into two parts leaving enough in the first to fund the $30 and transfer the balance to a new IRA with anew account number. Do the transfer before you start the SEPP.2008-12-11 02:30, By: Gfw, IP: [98.214.144.242]

L3: Minimum IRA Balance for 72TJust to clarify for my own info. You don’t have to use 120% of the federal midterm rate but withdrawing only $30k could violate the RMD calculation depending on age and life table used.2008-12-24 14:55, By: rt, IP: [68.46.156.217]

L4: Minimum IRA Balance for 72TIf you want only $30k, use the reverse calculator to determine the amount required to fund the $30k and transfer the balance to adifferent IRA with a different account numberand don’t usethe 2nd IRAas part of the SEPP. 2008-12-24 15:02, By: Gfw, IP: [216.80.125.206]