72(t) distributions

It’s clear you have to continue for the > of 5 years or 59.5. What is not clear to me is if one can take additional funds post 59.5 while continuing the calculated 72(t).

If John takes 72t’s at age 58 in the amount of 50k a year as calcuated under option two annuitization, can he take additional withdrawals of say 40k (90 total that is) once he is post 59.5?

If yes, what revenue ruling. Not 2002-62. If no where specifically does the code address this. Not pub 590.

thanks in advance.

Yikes, i remember 72t calcs and minimum requirements. To address your question, I believe you CAN take additional funds post 72t. How is the distribution being set up, an annuity?

Under the annuitization option. This is year three and client just turned 59.5.

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments

“The substantially equal period payments must generally continue for at least five full years, or if later, until age 59 ½. For example, if you began taking payments at age 56 on December 1, 2006, you may not take a different distribution or alter the amount of the payment until December 1, 2011, even though your fifth payment was taken on December 1, 2010.”

“If you begin taking substantially equal periodic payments on December 1, 2005, and you turn 59 ½ on July 1, 2011, you m__ay not take a different distribution or alter the amount of the payment until July 1, 2011.”

As I understand it, you have to take the “substantially equal period payment” for five full years OR age 59.5, whichever is later.

So, to continue your example above: say John Doe takes his first SEPP payment of $50k on September 28, 2012, at age 58. He must continue to receive ONLY $50k until September 28, 2016. Any distributions in excess of $50k would be subject to the 10% penalty.

Also, since it is FIVE FULL YEARS, John Doe can’t take an additional distribution until day one of the sixth year. That is, since he takes his fifth payment on September 28, 2016, then he can’t withdraw additional funds until September 28, 2017. Beginning September 28, 2017, he can take as much as he wants, penalty-free. He has taken payments for five years, and is over the age of 59.5.

NOTE - Depending on the method of determining the SEPP amounts, the amount may not be “fixed” at exactly $50k. But hopefully the point is still understood.

I assume you mean, “Can he take it without paying the 10% penalty?” And my answer would be, "Any excess distributions above the calculated value will be subject to the 10% penalty, even if the client is over the age of 59.5."

Greeney, who are you quoting here whe you say “any excess…”?

I’m not quoting anybody. I invented that.

I had hoped that my verbiage would make some sense out of it. But if you google “any excess distributions”, you won’t find it in any of the tax code.

Honestly, I came to the same conclusion you did regarding the idea of ‘excess distribution’. It’s ALMOST clearly laid out to imply that. However, I’m still looking for something that directly backs up the idea either a rev ruling or code.