Last payment question
L1: Question for Alan S.This is a variation on the stub year question. I started a 72t with first pmnt on March 20, 2006, and took full yr distribution that year (Amortization) and same amount was taken in 07, 08, and 09. In Jan 2010, I switched to RMD. I am traveling cross country by car (heading back home) starting tomorrow morning, and will not get home until Wed night to get to my computer,and I cannotget to the yr end 2010 account balance in that IRA to compute the 2011 RMD amount.(Did not write down website address I use at home and will have no computer access during my drive) My payments are issued on 5th of each month. If I am able to reach myfinancial advisor tomorrow by phone to stop the JAN payment (which would still be the monthly RMD amount from 2010) I assume I can take no more payments in 2011, since 5 yrs of payments have been received thru 2010. Then I can resume new payment amount of my choice starting in April 2011, and can assume they will code my 2011 1099-R with code 7, since I am almost 61. Let me know if that makes sense.
My problem is thatit may be too late for my advisor to get the institution holding the IRA (LPL) to stop ACH transfer and tax w/h for Jan 5th. If that is the case, and I get a monthly (2010 RMD) amount in Jan 2011, whatshould I doto make this a clean cutoff in stub year?
Do I compute annual RMD for 2011, and then compute 2/12th’s of that (for Jan and Feb), and then subtract Jan 2011 gross already made from that result to get gross amount I need in FEB 2011 (last) payment for this to be correct, with payments under 72t ending at that point?
Thanks for your help, and for Gordon’s tireless work in providing us with this site, which is where I learned all about 72t back in last half of 2005, when I retired atage 55.
2011-01-02 17:18, By: Ken, IP: [220.127.116.11]
L2: Question for Alan S.Not Alan, but… from the information posted,your 5-year period ends on 3/19/2011 so (based on my understanding) you really have three months in 2011, not 2.
If not possible to stop the payment (and they probably won’t unless they have something in writing), then you may want to take either 3/12s or 12/12s of the recalculated 2011 RMD.
Orif eligible and it may create a few red flags, rolloverthe 2011 distribution back into the IRA as if it never happened.
2011-01-02 17:38, By: Gfw, IP: [18.104.22.168]
L3: Question for Alan S.I concur with gfw. The rollover option is probably the best providing you are eligible for it under the one rollover per 12 month limitor do not mind not having the rollover option for thenext 12 months. It preserves your IRA assets and eliminates the need to do another RMD calculation for 2011 and calculate the extra amount you need to conform to the pro rated stub year option or to round out the full year amount if you elected that.
My impression was that you were originally planning to end your 72t distributions with your 2010 distribution, and if so rolling the amount you receive back to the IRA works best if you cannot abort the Jan distribution.
It also eliminates thedecision for a correct pro rated distribution being 2 months worthvs. 3, but we do nothear that the IRS cares whether youtake 2 or 3months worth in your situation.I have been assuming that if your plan starts in March, it ends in Feb, otherwise you would have 61 months of distributions and 6 March distributions.
2011-01-02 19:11, By: Alan S., IP: [22.214.171.124]
L4: Question for Alan S.Just a question for my own knowledge
If Ken did elect to rollback the January distribution, he would have to include the amount withheld for taxes, otherwise that would be deemed a distribution. YES?2011-01-02 19:57, By: meb24, IP: [126.96.36.199]
L5: Question for Alan S.MEGB24, I assumed the gross had to go back, soI am going to try to get that JAN pmnt stopped when I call in tomorrow. Then I won’t be stuck payingappx $1,000 in 2011 Fed and State taxes when JAN pmnt was made to me, and then putting that tax amount back into my IRA (along with the net $$ I received for JAN) with othermoney if I rolled the Jan pmnt back. Also If I rolled the JAN gross back, I assume I would get a 1099 that had -0- distribution and yet had Fed and state taxes paid for 2011, which would be strange. I’ll post what happens when I get home.. Today is my last day on the webuntil Thursday, so stay tuned. KEN2011-01-02 22:16, By: Ken, IP: [188.8.131.52]
L6: Question for Alan S.I do not understand why anyone thinks there is any problem. He is getting monthly distributions, so it is immaterial that the 2011 monthly distributions might be different from 2010. The only problem would be if the Jan payment of the 2010 amount exceeded the TOTAL 2011 distribution allowed for the 2 month period of Jan and Feb. ( He would have had a problem if he as taking his distribution annually in Jan, and the 2010 amount exceeded his 2011 calculation. Ofcourse, it would always be advisable to takeannual payments later in January after you knew the12/31 balance, unless it was being done automatically by the company.
I think he should not try to stop the 1/5/2011 payment, and just adjust the 2/1/2011 payment accordingly.
After 2/28/2011, his SEPP 72-T plan terminates because of the 5-year rule, and because he is over 59 1/2. As of March 2011, he can take any amount he wants from -0- to his entire balance, and none of it would be subject to the 10% penalty, and this will not bust his plan.2011-01-03 02:33, By: dlzallestaxes, IP: [184.108.40.206]
L7: Question for Alan S.Ken:
I don’t think thereare any problems that can’t be fixed fairly easily.
1. 12-31-2010 IRA account balance: Since the 2010 MD amounts were based on the 12-31-2009 IRA account balance, and since the 12-31-2010 IRA account balance is PROBABLY greater than the previous year’s balance due to a very favorable stock market, the distributions for 2011 will be GREATER than 2010 distributions. So if youwant to take the correct MD distributions for 2011 there is ample time to make corrections as suggested by others.
2. I can’t speak for LPL since they are not my Broker / Dealer, but I have had good experiences with other IRA custodians making corrections to IRA distributions. Eventhough LPLwill “withhold taxes” from the January 5 distibution … it ain’t gona get stopped at this late date … they don’t actually send the money to the taxing authorities immediately. As soon as you can get with your LPL advisor and explain the situation AND give him a definite plan of actions you want taken, then he should be able to contact LPL and make the necessary changes without much trouble.
Jim2011-01-03 15:24, By: Jim, IP: [220.127.116.11]
L8: update from KenThanks for all the replies to my post. Just got back to East coast after 2,200 miles (3 day drive) from Aspen/Vail area of COLO. I contacted my rep by phone on Monday morning, and she had already suspended my JAN payment, knowing I would need to supply her with a new RMD for the year 2011.I chose to stop pmnts altogether in 2011 on my 72t, since it ends on 3/19/2011, and I took full yr distrib in 2006, so thru 2010 I have all five years of payments. In April, we will setup some normal distributions to start, as I will be 61 then.
KEN2011-01-05 23:28, By: Ken, IP: [18.104.22.168]
L9: update from KenKen:
Great to hear about your good experience with your LPL advisor. It sounds like you have a good one that is pro-active rather than reactive. I know several LPL advisors and they are really good folks. In fact most independent advisors are pro-active and really have true concern for their clients. Unfortunately you only hear about the relatively few bad ones in the news.
Thank you for all of your inputs over the years. You have added to this “community” immesurably.
Jim2011-01-06 15:49, By: Jim, IP: [22.214.171.124]