72T Calculation

Just double checking but when calculating your 72T you do use the Current Balance and not the Cost Basis? correct.



You must use a balance generally within 6 months of the first 72t distribution that can be documented on a month end or year end statement. But the balance must also be reasonable in relation to the current balance. For example, you should not use a balance of 6 months ago if your balance has fallen considerably since that date. The IRS has not defined what is reasonable, but I think any balance more than 15% higher than the current balance might trigger IRS attention. Finally, the account funding the 72t plan can not have had a contribution or distribution between the date of the balance and the first 72t distribution. 

my question is when calculating 72t distributions with Bankrite the number for account balance  i put in from my costodian should be the account value witch is +15.17% more being  brokrage CDs $ or the cost basis this is not the first year

What Rate or Return do you use when calculating the 72T

Since 2002 (RR 2002-62) you are limited to 120% of the applicable federal mid term rate for either of the two months prior to the month of your first distribution. While you can use a lower rate, with today’s low rates you already are getting a lower annual distribution per dollar of account balance than ever. If your IRA balance generates a higher distribution than you need, it is recommended to partition your IRA into two accounts prior to the first distribution with one of them holding the balance that will produce the desired distribution using the full 120% mid term rate. That gives you more flexibility to use the other account as you wish.

Are you using the RMD method?  That’s the only method that requires a new calculation every year other than the rarely used recalculated plans. If using the RMD method, use the market value for brokered CDs, not the cost basis you paid. Due to the reduction in interest rates, almost all brokered CDs will show a market value higher, and in some cases much higher than what the CD was purchased for. 

Thank you!!!

I have a small pension from Vz of $123k, which needs to be rolled over. My current employer is a Non-Profit, and has a 403b with TIAA.I am currently 66 and my wife is 53, where can I put my money so that it can have growth; minimum risk; minimum fees; and be transferable to my wife upon my death?Also, I am contemplating to start receiving my Social Security Benefits and have $7k of it deposited into the retirement vehicle annually until I retire at 72. Since I am still gainfully employed, will the SS distributions be Taxable with my current income? My spouse is not working due to an accident in 2000 and only recieves $6k/annually. Are there any $olutions to my situation? Please advise.Thanking you in advance for your candor and words of wisdom.Respectfully,RFS / Queens, N.Y.      

FIrst of all, growth without risk is not possible with today’s very low interest rates. CDs and bonds will not even keep up with inflation. You will have to decide how much risk you can handle. Otherwise, this site is not geared to provide comprehensive financial planning because that requires revealing your entire financial picture now and in the near future. I will say that if you can afford to postpone claiming SS benefits until you retire, that will reduce your taxes and provide larger benefits for life. A rollover IRA in which you name your wife as beneficiary will allow her to maintain it as inherited to withdraw without penalty if she inherits before 59.5. If she inherits after 59.5, she should elect to assume ownership of the inherited IRA. Note that IRA distributions up to 20,000 per year are not taxable in NYS when made after the year the pension/IRA owner reaches 59.5. Meanwhile, I believe that TIIA has some low risk options for your 403b contributions, and that you can build up a decent balance in the 403b before you retire. 

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