Rule for distribution from multiple IRA, one is 72(t)
I have 2 traditional IRA’s, one I am taking 72(t) distributions from whose 5 years of required equal payments will end when I am 61 years old, I have taken no distributions from the second account but I have reached the age of 59 1/2. Can I take any amount as distribution from the second account without any IRS penalty on either account? The 72(t) from the first account will of course continue unchanged until the 5 years are up.
Thanks
Tom
Permalink Submitted by Alan - IRA critic on Thu, 2018-09-27 17:40
A distribution from the second account would bust your plan if that account balance was included in the initial 72t calculation to determine the distribution amount. If it was included then that second IRA account is treated as part of your plan and you could only take a distribution from it that was part of your annual distribution. You should have retained documentation of your original calculation that would normally include a copy of the initial balance of any IRA accounts that were to be part of your plan.
Permalink Submitted by Tom Bell on Sat, 2018-09-29 10:31
Thanks for the clarification, the balance from the second account was not included in the initial 72(t) calculation that determined the distribution amount, only the balance from the first account was used to determine the distribution. I have an electronic and a hard copy of the calculation in my files in case the IRS asks to see it. Are there any other issues I need to consider before I decide to take some $ from the second account before the five year time clock is expired on the distribution from the first account?Tom
Permalink Submitted by Alan - IRA critic on Sat, 2018-09-29 15:31
Since the second account is independent of your 72t plan, all transactions including contributions or distributions from that account will not affect your plan. There could be a small increase in the chance of an IRS inquiry since your total IRA income will increase, but you have the documentation to address that if you are asked to.