72t distribution
Question: Can a 72t distribution be rolled over to an IRA if it’s not paid out over 10 years or more (per IRS Pub.590; page 25).
For example, client, age 51; started 72t distributions 3 years ago; just received his 4th check. Based on the balance of the account, it will be depleted in 8 years. He doesn’t need the 72t amounts any more, but doesn’t want to stop due to retro-penalties. Can he roll the 72t payment over to his IRA?
Permalink Submitted by Al Fry on Mon, 2007-11-19 15:08
No they are not eligible for rollover, because they are actually payable over one’s “lifetime or life expectancy” (3a.). Yes, they can be stopped after later of 5 years or age 59 1/2, however they are not calculated that way. One opportunity that could be explored is to do a one-time change to the RMD method (unless already on that method). This will greatly reduce the distribution and cannot (because of the calculation) completely deplete the account. One can also use the Uniform Table to do the calculation, further reducing the distribution.