Changing 72(t) distribution date
My understanding is that the five-year period on a 72(t) payout schedule ends on the fifth anniversary of the first payment.
So, if I took my first payment on May 1, 2015, my five-year period expires on May 1, 2020.
For the sake of simplicity, let’s assume my periodic payment is annual. Within that five-year period, must the payment itself always come out on the anniversary of that first payment (i.e., every May 1st)? Or could I take it any time in the calendar year after the year of the first payment?
For example, if my first payment was on May 1st, 2015, could I take my second payment on, say, August 1st, 2016, my third payment on April 1st, 2017, and my fourth payment on December 31st, 2018? Or must it be May 1st every year?
Permalink Submitted by Alan - IRA critic on Wed, 2020-02-19 14:19
Since you are asking about the 5 year holding period, I assume you have a 5 year plan, meaning that you will reach 59.5 prior to 5/1/2020. If you distributed a full annual on 5/1/15 you do not have to take a distribution this year prior to 5/1/20 and it’s better that you don’t according to some interpretations of a prior tax case. The date and distribution pattern in prior years does not matter, as the only thing that matters in those years is that your 1099R reports the exact amount of your calculated 72t distribution. Therefore, the distribution pattern in your example is fine. I recommend you do nothing until at least 5/2/20 after which you have no restrictions since your plan modification date has passed.