Combining Roth & TIRA in 72(t) plan

Submitted by Doug Stecklein on Sun, 2020-01-26 06:16

Hi Alan,
I just wanted to let you know I found some detailed info about combining a Roth & TIRA in a 72(t) plan and taking distributions only from the TIRA.
https://retireearlyhomepage.com/rpt003e4.pdf
It starts on page 96.



Submitted by Alan - IRA critic on Sun, 2020-01-26 15:15

  • Thanks, I have the article and use it frequently, but somehow missed the p 96 section. While the overall treatise is 15 years old, it is for the most part still valid. That said, you will not want to try to introduce the IRS to it. Since simplicity is best when it comes to SEPP plans, obviously this type of combination is the exact opposite. 
  • There is no way of knowing how many such plans are currently in use, but my impression is that some of them survived simply because the IRS did not understand what they were looking at and was in no mood to analyze the plan and it’s tax reporting. This happens with many such plans. Other plans may have been busted, no way to say. I don’t recall anyone reporting to have actually used such a plan to completion including the 5 or so years afterward where one could assume they are safe.
  • One of the advantage of a complete combination is to select the mix of distributions between the IRA types to suit your tax situation each year, or how much of your Roth you want to have leftover at the end. Am certainly glad Stecker concluded that applying Sec 72 over the combined balance was not necessary, and basis in each IRA type remains the actual basis in each type applied on Form 8606.
  • I really doubt you will find any other analysis like this anywhere. Stecker was a noted authority at the time. Not sure if he is totally retired now or even still with us.

Submitted by Doug Stecklein on Mon, 2020-01-27 21:29

I stayed up until 1:00am reading it Saturday night.  Don’t judge me ;)In the end I have decided not to take the risk.  I will just do a SEPP on my TIRA In a few years when the balance gets a little bigger.

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