I'm just looking on input regarding the timing of the SEPP 72(t) distribution period, and when I can stop taking withdrawals.
- I am 57 1/2, so I know I must keep the SEPP schedule for 5 years (until I am 62 1/2)
My scenario / question:
- I have calculated the annual distribution amount to be $50,000
- Since I will be 59 1/2 in two years, I am going to these distributions in equal annual installments for the 5-year period, at which I will end the SEPP period, satisfying IRS rules
- I will take installment #1 for tax year 2023 on 12/1/23
- I will take installment #2 for tax year 2024 on 1/15/24
- I will take installment #3 for tax year 2025 on 1/15/25
- I will take installment #4 for tax year 2026 on 1/15/26
- I will take installment #5 for tax year 2027 on 1/15/27
These will all be 5 equal annual distributions in compliance with 72(t) - (I don't think the IRS cares when I take it during the year, as long as its the same total and I pay my tax!), but the 5-year anniversary of my initial payout won't be until the following year on 12/1/28. My question:
"Do I still need to take a 2028 distribution, even though I will be >59 1/2 (62) by then?" This would make 6 distributions. But the way I read the rule, seems like I would still need to take that 2028 distribution because I'm still required to take it in the fifth year of the SEPP period which is 2028. I think 6 installments are the result of me starting this process so late in 2023.
I know I can't add or withdraw more or less than the $50,000, but the timing has me confused. I think if I do not take a 2028 distribution, the IRS would consider that failing to take the required distribution during the final year of the SEPP period. I have asked several accountants and don't get a consistent answer.
Thanks in advance. I have been very thorough with tax planning, the calculations, the impact to my IRA value, and this is the right decision, just need a little help on the timing - many advisors, tax people, and planners just aren't familiar with this.
