Multiple 72t accounts
L1: Multiple 72t accounts
This seems as though it would be a common question but I cannot find it addressed:
Are multiple 72t accounts allowed to provide for S.E.P.P.?
$1M in total IRA currently
Decide right now to segregate $200k to a separate account for purposes of 72t SEPP use, and receive distributions from this account, leaving $800k in ‘normal’ IRA.
I few years down the road decide would like additional $100k segregated from the ‘normal’ IRA for purposes of 72t SEPP use, and start receiving distributions from this account as well.
Therefore having multiple designated 72t accounts from which receiving distributions.
Is this allowed? Or is there any known code/ruling disallowing this?
New or Existing SEPP plan? New, then another new in following years
Date of first intended distribution: 6/30/2019
2019-02-15 22:04, By: Tex, IP: [22.214.171.124]
L2: Multiple 72t accounts
Please read the section under 72t/72q plans , Planning Pointers
“When using the calculators start with Single Life table and the maximum interest rate allowed. If the single life calculations (Use Joint Calculations=No) produce a higher than desired payment, consider breaking the IRA into multiple accounts using only one of the accounts to produce the desired SEPP payment. Other accounts can be used for emergencies or for establishing another SEPP at a later date.”
So yes, it is recommended you figure out how much you minimally need, break up your 401(k) into separate accounts and use only one for SEPP payments. This way you can use the other account for emergencies or starting another SEPP if the distribution is not enough.
2019-02-16 00:11, By: Bass, IP: [126.96.36.199]
L3: Multiple 72t accounts
Your approach is conceptually what is recommended in most of the responses on this website.
However, you will be 54 1/2 in April 2020. Any SEPP 72-T plans that you start after that will mean that you will be locked in until after you reach 59 1/2. The first thing you should do is determine how much you need each year for the next 6 years. You should consider the tax aspects as far as how much your taxable income will be in 2019, and then each future year until 2025.
I would suggest setting up plans of varying amounts, and leave $ 50,000 – $ 100,000 in your IRA in a non-SEPP account for emergencies over the next 6 years. Depending upon your 2019 situation, you might start with a plan for either $ 500,000 or $ 250,000 in 2019, and then start the other plan in 2020. Then if you need more money, start one for $ 150,000 in 2021, and leave the remaining $ 100,000 for emergencies.
You should consider the respective tax brackets in each year as part of this process. If the tax brackets will be the same each year, then when you start additional plans, or how much you withdraw, is not as critical as when there will be different tax brackets to consider for certain years. Ideally you would want to structure your plan(s) to be taxed at only 12%, and not 22% or higher.
2019-02-17 20:15, By: dlzallestaxes, IP: [188.8.131.52]