SEPP (72t) distribution date
L1: SEPP (72t) distribution dateIfIbegin a 72t distribution on an IRA account in May of 2010, do I have to take the SEPP distribution on the same aniversary date every year or can I take my 2011 distribution in January or February 2011 instead of May 2011? I intend to use the amortization or anuitization method(s) for calculating. Thank you…2010-04-13 10:13, By: Saysme, IP: [22.214.171.124]
L2: SEPP (72t) distribution dateSince a SEPP plan is a calendar year plan, you can take subsequent distributions anytime during the year – just make sure that you take the full annual distribution before 12/31.
If you are just starting your plan, please also review our Planning Pointers page before you start – five points that will help you stay on track.2010-04-13 11:04, By: Gfw, IP: [126.96.36.199]
L3: SEPP (72t) distribution dateAs gfw noted, what you wish to do is OK. All you must do is to take out the exact correct total amount in each calendar year. When you do that is not a factor.That said, if you actually need the full amount of your funds by Feb, 2011 and you cannot take another distribution for 11 months, it could indicate that your plan is not sustainable for the entire required term of the plan, ie it will not produce enough annual income and you will be forced to bust the plan. It also could put you under extreme budgeting pressure as the year goes by. So you probably need to examine the reasons why you need these funds in the first two months of the year and what implications that has on making your plan last until it ends.2010-04-13 19:02, By: Alan S., IP: [188.8.131.52]
L4: SEPP (72t) distribution dateSaysme,
Alan is correct. I started out with semi annual distributions in March and September 2006. It felt great to load up the checking account, but it took determination to parcel it out so I did not run short before next distribution. InJanuary2007, I switched to monthly, and would never do it another way. In your case, perhaps you can get a “boost” by taking the first 5 months worth of payments in your first (May 2010) payment, and then taking monthly after that, so you have an extra 4 month cushion in your first year, since you would either need to take 7 months worth or the full annual amount in first year if starting in May. I did that on a second 72t that I started in May 2007 to cover teh payments ona new 2nd home we were buying, and Vanguard had no problem handling it that way. After that first payment, all the rest shd come monthly and be for same monthly gross amount, and it will always add up to full annual amount.Just a thought.Make sure you explain it clearly as to how that first payement will be different than all the rest, to total the full annaul amount in year 1.Shortening theannual distribution date is a sign that the annual distribution total will not last 12 months, and once you creep up to January, there is no more play in your annual distribution date the next year. If you overspend in one month, you can right the ship the next month, but if it happens with much bigger numbers, it is not easy to rectify. Stick to a payment date of the 5th of the month to avoid any year end problems, and make sure you got the correct YRLY gross after the Dec 5th payment each year, and if not, fix it quickly. Good luck. Ken2010-04-13 20:04, By: Ken, IP: [184.108.40.206]
L5: SEPP (72t) distribution dateDepending upon your 2010 tax situation, you are allowed to take the full annual amount in 2010, even though you are not starting until May. This can give you a 4 month extra cushion for future years. Moving your annual distribution to Jan/Feb makes sense in order to have the funds available to pay your taxes each year. But I also agree with the monthly distribution concept.2010-04-13 21:11, By: dlzallestaxes, IP: [220.127.116.11]