72 t distributions
Hello:
I would like to roll my 401k over into an IRA, then create two separate IRAs. I am under 591/2 and would like to take 72 t distributions from only one of the IRAs. I understand that this is permitted and I do not have to combine the accounts for purposes of the 72t calculation.
Is my understanding correct?
Thank you
Permalink Submitted by Alan Spross on Sat, 2009-03-21 23:50
Yes, that is correct.
The best way to do this is to use a reverse calculator and enter the max interest rate you can use for the month your plan will begin. The account balance you will need to generate the distribution amount you will need over the term of the plan should then be partitioned off from the rollover IRA. Use the partitioned IRA for the 72t plan and the original rollover IRA account will be maintained outside your 72t plan and will be available for emergency funding needs. You may have to pay the penalty on distributions from the original rollover IRA for emergencies, but your 72t plan will be protected.
Another benefit of this is that if your 401k plan has a dividend or other lagging payment, it will go into the original rollover IRA and not mess up your 72t plan.