start/stop of 72(t) distributions

L1: start/stop of 72(t) distributionsI have a client, age 55, retiring from major pharma Company. For the next year, he and his spouse think they will need distributions in excess of those calculated for 72(t).
They would like to make these premature distributions and the following year start with the 72(t) amount.
Can this be done? Any restrictions in doing so (I only anticipate the one time switch form premature to 72(t))?
Thank you, Bob2006-04-05 07:16, By: Bob, IP: [72.155.1.215]

L2: start/stop of 72(t) distributionsGood morning Bob:
If your client retires during the year he / she reach attained age 55, then distributions from the qualified plan (assumed to be a K-plan) are not subject to the 10% “Early Distribution Penalty.” So if their plan allows periodic distributions for the next 5 years, let them keep all or part of the funds withing their company plan for penalty-free distributions. Of course any money distributed to them from the company plan will be subject to the mandatory 20% withholding, which is simply a payment toward their final tax bill for the year of distribution. When you answer the question I have raised, I think your other questions will be answered and you will know how to best advise your client.
I’m working with a client, age 56 this year (2006) and he needs money from K-plan to pay off credit cards and supplement his company pension. Unfortunately his only option, per the company plan, is to take a partial distribution at the same time he does an IRA Rollover. When his credit cards and other loose loans are cleaned up, we’ll see what supplemental income he will need and then, if necessary, start a SEPP Plan from the IRA. The other element to this situation is the client is on a “Disability Retirement” and his attorney is working on getting the company and Social Security to award long-term disability payments, which will greatly affect his need for a 72(t) if successful.
Jim2006-04-05 08:55, By: Jim, IP: [70.184.1.35]

L2: start/stop of 72(t) distributionsAnother option to consider if the K plan only allows a lump sum distribution is to split that distribution between an IRA rollover and the amount needed to fund that first year expenses. It will be penalty free under the age 55 exception. Next year the 72t plan can be initiated using IRA funds.2006-04-05 22:40, By: Alan S., IP: [24.116.165.157]