Best practices when shutting down 72(t) distributions
If an IRA owner who has been taking 72(t) distributions has satisfied their requirements (5 years and 59 1/2) are there any best practices when terminating the schedule (either by turning off automatic distributions or just not taking the required amount)? Is it as simple as just stopping the withdrawal schedule? On a related note would it muddy the waters any if the IRA owner terminated the schedule but at the same time took another distribution in a different amount in the same month? Any guidance here is much appreciated.
Permalink Submitted by Alan - IRA critic on Thu, 2021-05-20 14:45
Distributions can simply be halted. There is no special tax reporting needed to indicate that a 72t plan has terminated. Before the plan modification date, the distribution pattern does not matter, however the amount distributed before the plan ends must meet the definition of a 72t plan distribution. For a 5 year plan, it is best to take 5 equal annual distributions rather than pro rating over 6 calendar years. Once the plan has ended there are no limitations on distributions.