72T Change
Client is 2 1/2 years into a 72T withdrawal. She would like to reduce the amount she is taking from the account. She has been withdrawing monthly $2900 and the RMD calculation method would reduce the withdrawal to $9800/year. Client has already withdrawn 4 months worth or $11,600 for 2009. She still needs some monthly income from the account. Is she able to change to the RMD method without penalty and use the RMD monthly withdrawal amount or since she has already exceeded what the RMD would allow for 2009, do we have to wait until 2010?
Permalink Submitted by Alan Spross on Mon, 2009-04-20 21:57
She does not have to wait until 2010. She could simply roll $1,800. of the last distribution back to the IRA (60 day rollover), then stop distributions for the rest of 2009. I would make sure that she gets confirmation of termination of future monthly distributions before rolling back any funds. Note that only one rollover is allowed for any 12 month running period, and using up that one rollover should not be taken lightly.
That said, the danger here is that the $9800 RMD method figure will not be enough to support her until the 72t plan modification date, so making the one time switch to RMD has it’s risks. If there is some doubt about the $9800 figure being sufficient, she could continue the prior amount this year and save as much of it as possible, make the one time switch next January, and use that savings as a safety cushion against having to eventually bust the plan.