Starting 72t

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L1: Starting 72tI would like to start a 72T on an IRA with an account balance of 302117.69 as of 04-22-2010. I turned 55 in Feb of this year. I would like my first distribution around May 7,2010. I would like to use the Amortization method and would like to withdraw around 15000 per year.I am wondering if this is possible and would like some of the expertise of the regular posters here. I appreciate the answers and information available on this website !2010-04-23 16:13, By: Twiceborn, IP: []
L2: Starting 72tTB-You are in luck, as the total you have is more than you need for $15K payments in a 72t plan at age 55 starting in May. Use the reverse calculator on this site, and plug in the $15,000 desired payment and your age of 55, and use single life method if it asks. It will show you that you need a little over$277K in an IRA to support Amortization pmnts of $15K per year that would start in May. Then before starting the SEPP plan, move out the rest (beyond what is needed for your plan) to a 2nd IRA that can be used for emergency withdrawals while SEPP is running, and setup the SEPP (72t) plan on the large one only. Get a printout of the balance in large IRA after the move, which is your starting SEPP balance, and use that to redo your AMORT calcs for final amount to be paid each year in your plan so it is correct. Do not opt for annual recalculation. It is not worth it and can cause problems. Much easier to know the same amount is to be paid each year. (In first year with May start date, you can take 8/12th’s of annual total or take full year’s worth. I started one in May 2007, and hadVanguard pay me 5months worth in May, and then monthly after that starting in June, and it worked out well.) Then an emergency that requires extra money from your smaller IRA won’t bust your SEPP, and will only have 10% penalty on the specific amount taken from the smaller NON-SEPP IRA. It will also give you a place to make penalty free withdrawals after turning 59 1/2, while SEPP is still running. This is a start. KenFOOTNOTE– Alan is right in his post below… May distributions use a lower INT rate of 3.25, so you need appx $282K2010-04-23 20:20, By: Ken, IP: []

L2: Starting 72tYes, it is possible. If you partition the excess of 282,500 into a separate IRA account and use the 282,500 as your initial balance, you would generate an annual payment of 15,003 per year. The smaller IRA of about 20,000could then be used for emergency needs.If you waited until June when the permissible interest rate rises, then you could either get a slightly larger distribution or you could partition off a little more and use a smaller balance than 282,500.Use the SEPP calculators on this site to refine the above figures. Also, note that if you separated from service this year (the year you turned 55) and have a retirement plan with that employer, your distributions would be exempt from the penalty and you would not need a SEPP unless the plan did not offer flexible distribution options. This exception does not apply to IRA accounts.2010-04-23 20:27, By: Alan S., IP: []