72t Withdraw using RMD and Single life table

Submitted by Gregory Danowski on Tue, 2017-12-05 19:42

In July of 2016 I initiated a 72t withdrawal from my traditional IRA, my broker used the RMD method with the single life table.

In early 2017 I transferred the account in its entirety to another firm, they have form which sets automatic 72t distributions and calculates the the 72t distribution using the RMD method with the uniform table only.

They indicated this is the only way they can do it and seemed to question the validity of using the RMD method with the single life table as my previous broker did.

So I would like to do its myself each year but have few questions to make sure I am in compliance.

Is the RMD method with the single life table valid?

Can the annual distribution be taken anytime within the calendar year each year?

My understanding is I should take the total account balance on the last day of the previous year for the calculation. Example: 2017 distribution would be calculated on the total account as of December 31st 2016. Is this correct?

The interest rate I should use each year will very year to year, and should use 120% of Mid-Term Rate from one of the immediate preceding 2 months in which the withdrawal will be taken.Example: For a withdrawal taken on Dec 2nd 2017, I would use 120% of Mid-Term Rate for October or November 2017. Is this correct?

Please advise if I missed something.

Thanks everybody in advance, have a GREAT DAY!



Submitted by Alan - IRA critic on Tue, 2017-12-05 21:34

  • RR 2002-62 is very clear that any of the 3 tables can be used, but once you select one you must stick with it. Therefore, moving to the Uniform Table would bust your plan. While the RMD method is inferior to one of the fixed dollar methods, at least the single life table will produce a higher annual distribution than the other two tables.
  • You can take your annual distribution anytime, and can change the distribution pattern from year to year. However, you must do your annual calculation at the same time each year and the IRA value must be on the same date. Better to use the 12/31 IRA value every year, so your understanding is correct.
  • You CANNOT use an interest rate because you elected the RMD method. Interest rates are used with one of the fixed dollar methods.  You take the prior 12/31 year end value, and use the SIngle life table with your age at the end of the distribution year and divide the table factor into that year end value. So it is not clear where you stand with your 2017 distribution amount, but if you are short of the annual amount, you can simply take out the difference before year end. If you are over and cannot get back to the correct annual amount by doing a rollback of a recent distribution, the plan is busted. This concern also applies to 2016, so it’s possible that the plan was busted last year. If so, the plan ended and you owe the retroactive penalty. If this has occurred, you can just report the penalty and start a new plan, probably using a fixed dollar method where the interest rate does determine the annual distribution. That calculation is only done ONCE at the start, not each year.

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