72(t) IRA account value

Submitted by ShipsnGiggles on Tue, 2018-07-10 13:13

IRA owner, age 50, IRA valued at $660,000 – will be “rolling” in an additional few hundred thousand into the same IRA – total value will exceed $1 million
Client is unsure of the amount needed to meet his SOSEPP – however he is confident he will not need base the 72(t) off the total account value (e.g. $1 million).

question –
For the purpose of 72(t) when is the account value determined?
When is the latest he can trustee-transfer a potion of the IRA value to another/separate IRA? Thus allowing the value of the second IRA not to be included in the 72(t) calcualtion?

Thank you



Submitted by Alan - IRA critic on Tue, 2018-07-10 15:14

  • There is no specific date, but general guidance indicates that the date should be within the prior 6 months from the date of the first distribution. However, the balance should also be “representative” of the value of the account on the date of the first distribution. What is representative has not been defined, but I would think that any value more than 15% more or less than the value on the first distribution would be excessive.
  • When the IRA account will have a balance that generates more than the taxpayer needs after considering inflation and some unplanned expenses, the amount that generates the payout desired should be transferred by direct trustee transfer to a new IRA account. This can be done right up to the date of the first distribution, but of course the taxpayer must then use that opening balance in the new IRA in the calculation of the SEPP amount. The taxpayer would then have the original IRA that is NOT part of the SEPP plan to use for emergency needs to prevent busting the SEPP. 

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