72T Question
Hello, I have a client who started a 72T monthly plan in 08/10/2007 (age 48) and the client turned 59 1/2 on 04/17/19 and wishes to merge the IRA with the 72T with another one of the client’s traditional IRA’s. My question is does the 72T plan need to run until the end of this or since the client turned 59 1/2 on 04/17/19 this would satisfy the 72T requirements and the client can merge the account as they wish? Any feedback would greatly appreciated.
Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2019-05-01 18:20
Because the 72t ended on 4/17/2019, the client is free to make unlimited changes to the account. He can combine this IRA with any other IRAs he has without waiting until year end. While all these changes are allowed, distributions after 4/17 from the same account number will increase the 1099R amount, and could generate a request from the IRS to show documentation of the dates of these distributions. If client wants to avoid any IRS scrutiny of the 72t plan, it might be best to limit additional distributions after 4/17 to the other IRA accounts so any 1099R forms will be from different accounts. So if distributions are still needed, maybe best to delay combining the accounts until 1/2020.
Permalink Submitted by Kevin O'Hearn on Wed, 2019-05-01 19:43
If a client is turning 59 1/2 (plan started in 2011) in August and has been using the “RMD” for his monthly payments. Can the mothly payments stop or will the client need to continue the payments thru December since if they stop in August then the full RMD will not be taken for this year.
Permalink Submitted by Alan - IRA critic on Wed, 2019-05-01 21:14
In the final year of a 72t plan that is more than a 5 year plan, the client has 3 options – distribute 0, distribute the entire balance, or pro rate by the month. It appears that client has been pro rating the annual payment by the month, so client is fine as it stands. Since the plan ended at 59.5 anyway, it is too late to do anything different now that would affect the plan. Additional distributions are not part of the plan, but he can take out what he needs or stop the distributions.