SEPP withdrawal restriction on additonal withdrawals
If someone now age 56 starts a SEPP withdrawal from a traditional IRA with the intention of doing it for five years until he is age 61, is he allowed to make an additional one time withdrawal at age 59.5?
Permalink Submitted by Alan Spross on Fri, 2011-10-14 19:29
No.
No additional distributions are allowed until the plan ends after 5 years. You are allowed a one time switch to the RMD method, but that will reduce the annual distribution, not increase it.
If someone retains an IRA account outside of the SEPP account, then a distribution at 59.5 would be penalty free. If this a known expense, the IRA could be partitioned such that a separate IRA account holding the balance needed at 59.5 is created and kept outside the SEPP. The balance could not be included in the initial SEPP balance on which the SEPP calculation is made.
If a SEPP is busted due to a violation such as not taking out the exact amount, the retroactive penalties only apply to distributions taken prior to reaching 59.5, even if the SEPP initially had to run beyond age 59.5.