SEDs, then lump sum distribution from IRA

L1: SEDs, then lump sum distribution from IRAI am 49 years old, working,and taking72t “substantially equal distributions” for about three years now under the fixed annuitized method from three IRAs, two owned by my wife, who had to stop workingdue toillness, and one ownedby me. Can I:
1. Take a lump sum distribtuion from one or all IRAs for a qualified reason (say, tuition) not subject to the 10% penalty without screwing up the 72t distributions?
2. Change the distribution method for next year with or without taking the lump sum?
Help would be much appreciated.2007-05-20 06:48, By: BillOGoods, IP: [68.41.183.12]

L2: SEDs, then lump sum distribution from IRA1. Not from a SEPP plan, but yes from any other plan not used in the SEPP. If your wife can prove disability, then her IRA distributions no longer need to be made under a SEPP as disability in an exception.
2. Only change allowed is to the Minimum Distribution method.2007-05-20 07:11, By: Gfw, IP: [24.148.85.129]

L2: SEDs, then lump sum distribution from IRARemember, in this case, you have a SEPP using one IRA account and your wife has an unrelated SEPP using two IRA accounts. These are unrelated in the eyes of the IRS, so If you bust one of the plans, the other remains valid. With a 13 year term for at least your own plan, it is likely you will encounter a couple more years when the distribution does not fit your needs, as 13 years is a long time for this type of plan. That”s the risk in a long term plan unless you have the flexibility of other retirement accounts that were not included in the original SEPP calculations.
Whatever you do, it takes a crystal ball, particularly if you don”t know if your wife can resume full time employment at some point. Obviously, a bust 3 years from now at 52 will cost over twice as much as busting it now, so if it”s far enough out of wack now, it may pay to bust it before it gets much more onerous.
If the disability option is viable, be sure you check out the technical definition in view of your wife”s medical situation. That could free up her accounts entirely from here.
2007-05-20 20:55, By: Alan S., IP: [24.116.66.98]

L2: SEDs, then lump sum distribution from IRAThank you so much Gfw and Alan S.
None of the three IRAs are SEPPs if, by that term, you mean Single Employer Pension Plan-type IRAs. They are “garden variety.” The disability option may be something I can explore.
But, what do you mean by “a bust 3 years from now at 52 will cost over twice as much as busting it now, so if it”s far enough out of wack now, it may pay to bust it before it gets much more onerous”? Do you mean if the early lump sum distribution I want to take from the IRAs is held to screw up the 72t payments, then the IRS goes back to the beginning of SEDs to tax and penalize me?
Also, are you guys saying that, let”s say absent proof of disability, if I take from all three IRAs an early lump sum distribution and it qualifies to be exempt from the 10% penalty, it won”t dequalify or screw up my 72t payments? If so, that would be great. What if the lump sum distribution does not quality and I have to bite the bullet and pay the 10% penalty?
Thanks a lot!
2007-05-21 04:48, By: BillOGoods, IP: [68.41.183.12]

L2: SEDs, then lump sum distribution from IRALet”s start at the beginning – you are taking 72(t) distributions from an IRA – this type of distribution is known as a SEPP [Substantially Equal Periodic Payment] plan. I”m just guessing, but it is probably what you are calling a SED.
Do you mean if the early lump sum distribution I want to take from the IRAs is held to screw up the 72t payments, then the IRS goes back to the beginning of SEDs to tax and penalize me?Short answer, yes! While a SEPP is running, no distributions other than the planned distributions, may be taken without busing the plan. From the IRS standpoint your SEPP and your wife”s SEPP are two different plans.
Also, are you guys saying that, let”s say absent proof of disability, if I take from all three IRAs an early lump sum distribution and it qualifies to be exempt from the 10% penalty, it won”t disqualify or screw up my 72t payments?Wrong. The only exceptions are death and disability – any other distributions will bust the SEPP. If your wife meets the definition of disability as defined by her IRA document then she doesn”t need a SEPP for distributions – the disability exclusion would apply. Check with the IRA/Custodian to see if she meets the requirements. With that said, unless she is disabled for Social Security purposes, she probably isn”t disabled for purposes of her SEPP plan. Her disability would have no impact on your SEPP.
You may want to spend some time reading the FAQ http://72t.net/Sepp/Irc72tFAQ.aspx
A mistake in what you do could be very expensive.

2007-05-21 05:14, By: Gfw, IP: [24.148.85.129]

L2: SEDs, then lump sum distribution from IRABill,
I addition to Gordon”s suggestion that you read the FAQ section of his website, you should also browse thru older posts that are related to your topic. Change the fields at top of the screen to” “Show all records” and change the # of months viewed to at least 12, then when screen refreshes, you can arrow up and down over all of the subjects that were posted for that period. Here are a few that I think you should read: FRANK 4/14/07, RYAN 1/26/07, HITE 1/4/07, and SAFFORD 12/21/06. They all had some info that you may need. One more question: Is each of the 3 IRA”s running its own 72t SEPP plan, (did you apply for each separately with the custodian) or are your wife”s two balances combined into one plan? If all are separate, and you take more money out of just one, then the retroactive 10% penalties and interest should only be assessed on the one that you “Busted”. Stills sound like a bad idea to me. KEN2007-05-21 06:30, By: KEN, IP: [68.160.36.172]

L2: SEDs, then lump sum distribution from IRAI am most grateful for your responses and I will review the sources suggested. Some of those sources were reviewed by me before I posted, but this is a complex area and they didn”t mean much until you laid out some specifics. Thanks!2007-05-22 15:17, By: BillOGoods, IP: [68.41.183.12]

L2: SEDs, then lump sum distribution from IRAImplied, but unstated, in all of the previous postings — GET PROFESSIONAL ADVICE FROM A PRACTITIONER EXPERIENCED IN THIS SPECIALIZED AREA !!!!!! Most tax preparers, tax attorneys, enrolled agents, and financial plannershave never heard of SEPP 72-T plans, or this website. (Most think you are talking about SEP”s, i.e. “Simplified Employee Plans”.)2007-05-22 16:12, By: dlzallestaxes, IP: [151.197.168.45]