I have a client who is starting his 72T distribution. His DOB is 07/03/1965. At the end of February, his total IRA balances was $654,540. He wants the maximum he can get and qualify for 72T. Using .67 (interest rate assumption) for February and his end of February balance of $654,540, I am coming up with a maximum withdrawal of $25,145 (annual) using the single life table and Fixed Amortization Method. Does this calculation look correct? Thanks. Chris Fletcher
In that case, I’m guessing its easier and best to make this an annual vs monthly distribution???
You could still do monthly, but you would have to adjust the payments for this year (1/10 the annual) and change them back to 1/12 starting in Jan, 2022. With any automatic payment, best to avoid the first and last week of the month, due mainly to year end problems which could result in the Dec distribution being late with no time to fix it. Have also seen the Jan distribution being made at end of Dec and either of these errors would bust the plan. Finally, the annual distribution pattern can be changed from year to year, the only critical requirement being that the 1099R amount is exactly correct.
Do we need to worry about decimals? $25,145 is $2095.416666666/month. Is it ok to just do $2095 per month?
It would probably pass, but why take the chance. If the distributions are set up for 2095.42, the 1099R would be within pennies of the 25,145 and would round down to 25,145 exactly. Suggest the distributions are set up using 2095.42 per month starting 2022. For the rest of this year, if set up for 10 payments, they should be 2514.50 each. Again, the end goal is to have the 1099R show 25,145 or an amount that would round up or down to 25,145. Unfortunately, this often cannot be done if the individual payments are rounded to the nearest dollar.
Permalink Submitted by Alan - IRA critic on Mon, 2021-03-01 17:17
Yes, it is correct. Since this will be a 5 year plan, it is safer to have client withdraw the 25,145 for each year 2021-2025, and not take a distribution in 2026 prior to the plan modification date.