72t distribution
i have a client age 58. he has 700k in 4 different IRA’s. can he combine the IRA’s for the calculation and take the distribution out of only one of them for the required 5 year period. thank you
i have a client age 58. he has 700k in 4 different IRA’s. can he combine the IRA’s for the calculation and take the distribution out of only one of them for the required 5 year period. thank you
Permalink Submitted by Marvin Rotenberg on Tue, 2009-01-06 19:09
No. He will have to pick one or more of the IRAs to do the 72(t) calculation. You can not combine the IRAs for this purpose.
Marvin
Permalink Submitted by Alan Spross on Tue, 2009-01-06 19:22
Actually, he can take his 72t distribution from any combination of the IRA accounts that are part of his “72t or SEPP universe”, that is, the IRA accounts that he has selected to be included in his initial account balance.
If he has kept one or more of these IRA accounts outside the SEPP plan to use for emergencies or simply because he did not need those balances to generate an adequate distribution amount, then he cannot use those other accounts to satisfy any portion of the 72t distribution requirement.
If he elects to include more than one IRA account in his SEPP universe, but takes the full distribution out of only one of them, he will almost certainly need to file Form 5329 to claim the penalty exception because he will not get the exception coding on the custodian issued 1099R. Filing the 5329 is simple and does not create a “red flag” for the IRS. Still, he should keep very well documented records of his calculations, as should all 72t participants, just in case the IRS inquires.