72t
Can you set up 2 seperate IRA accounts with the idea that you draw 1 down to zero by the time you reach age 59.5 or as close as possible. Ie say a person has 700k and is 53 y/o …run the 72t on that total..set up 2nd ira with roughly enough $ to pay those payments only and invest the other account until age 59.5.
If so what happens if you run the account with the 72t to zero before 59.5. say like 6 months or so early?
Permalink Submitted by Alan Spross on Mon, 2012-04-09 16:47
If you have two IRA accounts and you used the total balance to calculate the 72t distribution, both of them are considered part of the plan. But you can take the 72t amount out in any combination you wish over the two accounts as long as the year end total is correct. This means that if one of the accounts runs out before your plan is complete, you MUST use the other account to replace the shortfall.
Other options are:
1) Only have one IRA for the 72t plan, and keep the other totally outside the plan to use for emergencies even though the non 72t distributions will be penalized
2) Have two totally separate 72t plans, using different IRAs. This way, if one runs out, that plan just ends and there is no penalty. Each plan stands on its own.
For any 72t plan, if the account balance is exhausted, the plan just ends and there is no penalty. Of course, since a given balance for an IRA only generates less than 5% in 72t annual payments, and if the account does run dry, you have much more serious problems than your plan.
I am not sure if this totally answers your question…