Final Year of 72t Question
We have a client who has been receiving monthly 72t payments for more than 5 years and next year in August turns 59 1/2. The question is does he only have to receive the monthly payments through August or does he still need to receive all 12 months worth of payments in order to complete the 72t? Thanks!
Permalink Submitted by Alan Spross on Wed, 2009-10-14 17:44
Once he has taken out 60 months worth of payments, and enter the final stub year of his plan (2010), he actually has several options for that final year.
1) Take out nothing prior to the day he turns 59.5
2) Take out 7 monthly payments, the last one being the month prior to turning 59.5
3) Take out his full annual distributions before he turns 59.5
With this flexibility, he can plan according to his needs for cash vrs his desire to maintain more of his assets in his IRA for later years. Options 2 and 3 are the same as those in the first stub year of a 72t plan, ie pro rating by the month the plan begins or taking out the full annual amount.
Either way, his modification date is the day he turns 59.5. After that day he can take out as little or as much as he wants penalty free. But prior to that date, he must adhere to one of the 3 options above.