72t Accounts
I have an IRA. There is a portion of this IRA that I would like to transfer into 3 new IRA’s for 72t purpose. The reason for the 3 separate accounts is due to the portfolio management. The original IRA would be maintained for emergency as to not disrupt the 72t accounts. I assume there isn’t an issue with establishing 3 IRA’s for 72t purposes but I wanted to verify. Thanks.
Permalink Submitted by Alan - IRA critic on Tue, 2017-02-07 16:41
With a 72t plan, simple is always better. But you CAN use 3 different accounts for your SEPP, and you can complete the annual distribution in any combination from those accounts, but using one (one 1099R)is better. Your original account balance must include all 3 accounts on the same date after they have been established. Once established, to avoid any problems with partial transfers, if you want to change a custodian you need to transfer all 3 because a total transfer is OK but the IRS has busted a couple of partial transfers in the past. SInce all 3 accounts are part of the SEPP, they are all under the same restrictions meaning that none of them can receive contributions of any kind or make a distribution that is not a SEPP distribution. It is helpful to have the original account outside the SEPP so you can take emergency distributions if needed.
Permalink Submitted by Krista McBeath on Tue, 2017-02-07 17:04
Ok. So with the 3 accounts, I use the combined total of the 3 that will be utilized for the 72t distributions to calculate the payment. Then, does it matter how the total amount comes out of the 3 accounts. Does it have to be equally?
Permalink Submitted by Alan - IRA critic on Tue, 2017-02-07 19:19
No, as stated above it can come from any of the 3 accounts in any proportion, but if possible it is simpler to use just one of the 3 for the total annual distribution. Less chance of making an error and only one 1099R to report.