72T rules and Lump Sums
Can an IRA owner take a lump sum distribution from an IRA that is already making distributions under 72T? A 59-1/2 year old client wants a lump sum, but he started monthly distributions under 72T three years ago. The lump sum would be about 10% of the account value. Would there be any consequences?
Permalink Submitted by Alan - IRA critic on Mon, 2014-05-05 19:11
If you mean a one time payment of the exact amount of the 72t calculation instead of monthly or other payments, that is OK. If you mean an amount in addition to the 72t calculation it will bust the plan, and the IRA owner will owe a 10% penalty plus interest on the distributions taken prior to reaching 59.5. A 10% distribution sounds like it will exceed the calculated amount by a large margin. This is a 5 year plan, and the exact calculation must be taken out prior to the plan modification date, which is 5 years from the date of the first distribution. After that date the plan is over and the IRA owner can take out as much or as little as they please.