72t Question
I have a client, 57, who wants to do a 72T. He has a 401k from a previous employer, a traditional IRA, a roth and his current TSP to which he is still contributing. For calculation purposes, can he use the total of all the qualified accounts, excluding the Roth?
Permalink Submitted by Alan Spross on Sun, 2011-02-06 19:53
For purposes of combining the balances for a 72t plan:
1) Each 401k and the TSP cannot be combined with any other accounts
2) The TIRA and the Roth IRA can be combined, although that is unusual and could trigger IRS questioning. He would have the choice to take his distributions from either in any combination, so could manage the tax liability.
Unless there are unusual circumstances, the typical plan of action would be to do a direct rollover of the old 401k to a TIRA, which could then be combined with the current TIRA for 72t balance purposes.
If client separated from former job at 55 or later, distributions directly from the old 401k are penalty free, and that would avoid having to start a 5 year obligation while only 2 years short of 59.5.