Traditional IRA Periodic Distributions – Pay Back or Rollover?
Hi All:
I can’t really find a direct answer as I research this.
I’ve got a Client who is financing a new home.
The Mortgage Company says “we need to see at least three periodic IRA Distributions of $6k each before closing.”
Client is old enough to take distributions without penalty.
Frankly, this Mortgage Company has been making insane requests. My clients have a New Worth of around $2.5MM. I told them a few weeks ago to start working with a different Mortgage Company. Much to my chagrin, they haven’t.
Client just took the first $6k Distribution and will be taking the other two distributions.
Client wants to stop the Distributions after they Close on the Mortgage.
They want to put the $18k back (3 x $6k Each) into the same IRA or Roll it into another IRA.
I read somewhere that they could “Rollover” One Payment, BUT, if they were periodic payments, then they cannot “Roll” the others.
I also understand the “60 Day ” Rule. like, as in, if they take 3 distributions within 60 Days, can we Roll it into another IRA?
But, since these are “Periodic” Distributions, can they just Roll Payment 1?
I just can’t quite, “connect all the dots,” on this.
Please, any help is greatly appreciated!
Thanks to anyone in Advance for reviewing this and providing any constructive feedback.
~JC
Permalink Submitted by Alan - IRA critic on Sat, 2022-02-26 21:30
These distributions do not meet the definition of substantially equal periodic payments, but that just means they can roll over one of them to an IRA instead of none. There are a couple options for the other 2, first if client is still employed with a 401k plan that will accept IRA rollovers, client could roll the other two into the employer plan. Another option would be to convert the other 2 to a Roth IRA, but taxes would still be due.
Permalink Submitted by Jefferson Chickering on Mon, 2022-02-28 16:27
This is much appreciated, thank you for spending your time assisting me with this!These distributions are coming from one of the Spouses, who is now retired and wouldn’t have options to “Roll” the other two into a 401(K) as such.I will share this with my Client :).