Final year of a SEPP
Lets say I begin a Substantially Equal Period Payment (as defined in Sec 72(t)(2)(A)(iv) from my traditional IRA using the Ammortization method and begin at age 50, and wish to stop it at the earliest day, which is when I reach age 59.5. Does this mean that I have to take a full distribution in the year I reach 59.5, or can I take a proportional withdrawal based on what month (or day?) I attain 59.5 that year?
Thanks
BruceM
Permalink Submitted by Alan Spross on Mon, 2008-05-12 22:47
Bruce,
According to Bill Stecker who makes a living managing 72t plans, based on a series of rulings and also based on what the IRS does NOT question, there are 3 choices in the final stub year AFTER the 5 years has also been satisfied:
1) You can take the full annual distribution in that final year before reaching 59.5.
2) You can pro rate by the month the full annual distribution ending with the full month prior to turning 59.5. This is the only pro rate option available.
3) You can take nothing.
A surprisingly broad array of options. While he feels none of these carry any risk, I suppose if I had to pick the one with the least amount of risk, it would be option 2. The IRS has been consistently quiet about inquiring or criticizing final stub year choices other than making absolutely sure that at least 60 months worth has been distributed in total, but that’s not an issue with your situation.