setting up 72(t)
My client who is age 54 wishes to set up the 72(t) distribution on his IRA. Currently he has one IRA worth $2,320,000. I ran the numbers and he needs $2,000,000 to get to his desired income requirement using the amortization method. My plan was to set up another IRA and move 320,000 worth of assets to the new IRA in case he might need a lump sum distribution. Then to set up the 72(t) on the IRA with $2,000,000 left in it. I just wanted to make sure I am thinking this through correctly.
Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2013-01-28 21:03
Yes, this is a wise approach. The transfer to the new IRA should be done by direct TtoT transfer. That way, the one rollover allowed for the 72t IRA will be preserved in the event too much is taken out in error and funds need to be rolled back to preserve the 72t plan. Having the second IRA allows the flexibility of emergency distributions if needed without busting the 72t plan. Note that the account balance used to calculate the 72t distribution on the remaining IRA must be for a date AFTER the transfer of funds to the new IRA. Just leave a balance of 2mm if that produces the needed cash flow.