Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
72t set up & low risk investment options.
Old 01-04-2016, 12:12 PM   #1
Recycles dryer sheets
 
Join Date: Sep 2008
Posts: 353
72t set up & low risk investment options.

Am 54 and plan to start a 72t with my Vanguard IRA in the next year or so.
Keeping 2 smaller ROTH IRA's for old age.
Couple questions, who should I go with to set it up?
(I know the initial set up is critical, and some folks make mistakes)
Tax person? Or someone else?
Have used this site for an idea what to expect.
http://www.dinkytown.net/java/Retire72T.html

Also, is there any specific way to invest as $$$ will be coming out?

Or leave some liquid for the annual or monthly deductions?
A fixed income account is fine with me. Even a 5yr CD at 2.35%
Looking for low risk investment advice that allows 72t deductions.
Thanks in advance!
__________________

__________________
almost there is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-04-2016, 02:47 PM   #2
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: 19th Hole
Posts: 2,529
When I did my 72T years ago, I ran the numbers, had an accountant and Fidelity also run the numbers. Regardless of who does the calculations you are responsible. About two years into the 72T I got a letter from the IRS telling me I wasn't eligible and owed a big penalty. After sending them my documentation they stood down and said sorry. Just make sure after you start your taxes, file the 5329 form to note the exception. Even though I did this from the first tax return I still got called on it by Uncle Sam. My advice is do your homework and make sure understand all the rules.

All of my distributions came out of my FIDO MM settlement account and the rest of my IRA consisted mainly of index funds and a few stocks.

Hope this helps and good luck.
__________________

__________________
A totally unblemished life is only for saints.
frayne is offline   Reply With Quote
Old 01-04-2016, 03:25 PM   #3
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,726
Quote:
Originally Posted by almost there View Post
Am 54 and plan to start a 72t with my Vanguard IRA in the next year or so.
Keeping 2 smaller ROTH IRA's for old age.
Couple questions, who should I go with to set it up?
(I know the initial set up is critical, and some folks make mistakes)
Tax person? Or someone else?
Have used this site for an idea what to expect.
http://www.dinkytown.net/java/Retire72T.html

Also, is there any specific way to invest as $$$ will be coming out?

Or leave some liquid for the annual or monthly deductions?
A fixed income account is fine with me. Even a 5yr CD at 2.35%
Looking for low risk investment advice that allows 72t deductions.
Thanks in advance!
Never did it, but read about it.
One suggestion was to split off into a new IRA the total amount of funds you expect to withdraw. This allows you the freedom to draw extra from the original IRA without touching the new 72t IRA. This is important otherwise you get a giant penalty.
It also allows you to do it again, meaning you could split off another IRA and do a new 72t on that one, because perhaps you miscalculated expenses or some increased a lot.

Do you have a 401K, some allow penalty free withdrawls past age 55, then you don't have to be locked into the 72t.
__________________
Sunset is offline   Reply With Quote
Old 01-04-2016, 03:57 PM   #4
Recycles dryer sheets
 
Join Date: Sep 2008
Posts: 353
I no longer have a 401k. Left the work force about 2 1/2 yrs ago.
My IRA is currently split up between Vanguard and Ally bank.

I have been doing home work on this & still am.

"All of my distributions came out of my FIDO MM settlement account and the rest of my IRA consisted mainly of index funds and a few stocks."

Q: Can the dollar amount used on a 72t calculation be based on all IRA funds? Held in more than one company? Can I add both Vanguard and Ally together for my calculation? Then say draw from Ally?

That would make it easier leaving the 5 yrs worth of deductions in a MM account at Ally.
__________________
almost there is offline   Reply With Quote
Old 01-04-2016, 05:11 PM   #5
Thinks s/he gets paid by the post
zinger1457's Avatar
 
Join Date: Jul 2007
Posts: 1,452
A good resource is 72t.net. Not sure if it's possible to run a 72t from two separate IRA accounts, I've only heard of people doing it from one. Even if possible it seems like you would be making a somewhat complex and unforgiving transaction more complex. There are several 72t calculators on the web, run through them to see what your initial IRA balance needs to be to get a desired annual income.
__________________
zinger1457 is offline   Reply With Quote
Old 01-04-2016, 05:20 PM   #6
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: 19th Hole
Posts: 2,529
Quote:
Originally Posted by almost there View Post
I no longer have a 401k. Left the work force about 2 1/2 yrs ago.
My IRA is currently split up between Vanguard and Ally bank.

I have been doing home work on this & still am.

"All of my distributions came out of my FIDO MM settlement account and the rest of my IRA consisted mainly of index funds and a few stocks."

Q: Can the dollar amount used on a 72t calculation be based on all IRA funds? Held in more than one company? Can I add both Vanguard and Ally together for my calculation? Then say draw from Ally?

That would make it easier leaving the 5 yrs worth of deductions in a MM account at Ally.
I don't know the answer.
__________________
A totally unblemished life is only for saints.
frayne is offline   Reply With Quote
Old 01-05-2016, 10:55 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Location: Los Angeles area
Posts: 1,432
I have been 72t'ing for 9 years now, at schwab, using the simplest (life expectancy) method of calculating the withdrawal amount. Schwab does not care that it is being 72t'ed - just make sure to use distribution code 2 to make withdrawals, and to withdraw EXACTLY the right amount each year.

Each IRA account (including all subaccounts) requires its own 72t. You may have as many as you want.

No deposits, extra withdrawals, or anything else once the 72t distributions are started. These break the 72t and cause a large tax bill. You may of course move money within the IRA (buy/sell stocks or funds,etc).
__________________
learn, work, save, invest, fire
CyclingInvestor is offline   Reply With Quote
Old 01-06-2016, 12:08 AM   #8
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,726
Quote:
Originally Posted by CyclingInvestor View Post
...No deposits, extra withdrawals, or anything else once the 72t distributions are started. These break the 72t and cause a large tax bill. You may of course move money within the IRA (buy/sell stocks or funds,etc).
This is why it is best to split the IRA, so that one IRA is not under 72t rules, so you have some flexibility.
__________________
Sunset is offline   Reply With Quote
Old 01-06-2016, 07:48 AM   #9
Recycles dryer sheets
 
Join Date: Sep 2008
Posts: 353
Thanks CyclingInvestor, will call Ally and ck with them.

But it sounds like I can get 1% with Ally IRA in a savings account
and take the exact annual 72t amount from that account while leaving the rest with Vanguard.
If that's the case, it will make it easier. In my mind anyway.

Is distribution code 2 a federal code? Or a Schwab code?

Thanks again!

On 2nd thought. It wont work if the 72t calculation has to be based on one IRA.

Hmmm Say I have 500k total in 2 IRA's. and would like 20k per yr for 5 yrs. Or 100k. If I put 100k in ALLY would my 72t calculation have to be based on that account / 100k? Or is the calculation based on ones IRA total?
----------------------------------------------------------------------------
Quote:
Originally Posted by CyclingInvestor View Post
I have been 72t'ing for 9 years now, at schwab, using the simplest (life expectancy) method of calculating the withdrawal amount. Schwab does not care that it is being 72t'ed - just make sure to use distribution code 2 to make withdrawals, and to withdraw EXACTLY the right amount each year.

Each IRA account (including all subaccounts) requires its own 72t. You may have as many as you want.

No deposits, extra withdrawals, or anything else once the 72t distributions are started. These break the 72t and cause a large tax bill. You may of course move money within the IRA (buy/sell stocks or funds,etc).
__________________
"I couldn't wait for success, so I went ahead without it." Ret. 2013 @ 51.
almost there is offline   Reply With Quote
Old 01-06-2016, 09:23 AM   #10
Full time employment: Posting here.
Dog's Avatar
 
Join Date: Apr 2006
Posts: 781
I started a 72t last February using my IRA at Vanguard (I only have one IRA). I used the 72t.net site and then met with an accountant to review the calculation to ensure it was done correctly. She spent 5 minutes looking at it and said it looked good. I worked with Vanguard to determine what % to pull from each of my Vanguard funds within my IRA, filled out paperwork and started monthly auto distributions to match the annual required distribution. I chose the minimum distribution payout and have 10% taxes withheld.
I'm not sure if the below answers your question or not.


"If you have multiple IRAs, you are allowed to take 72(t) distributions on only one account. You would then be able to save the other account(s) for emergency lump sum distributions (on which you would owe the penalty) or to create a second 72(t) distribution. You are also allowed to aggregate the IRA amounts and pull the total 72(t) distribution from just one of the accounts."
__________________
"Tell me, what is it you plan to do with your one wild and precious life?" - Mary Oliver
Dog is offline   Reply With Quote
72t set up & low risk investment options.
Old 01-06-2016, 09:37 AM   #11
Full time employment: Posting here.
Accidental Retiree's Avatar
 
Join Date: Feb 2012
Posts: 975
72t set up & low risk investment options.

Quote:
Originally Posted by Dog View Post
I started a 72t last February using my IRA at Vanguard (I only have one IRA). I used the 72t.net site and then met with an accountant to review the calculation to ensure it was done correctly. She spent 5 minutes looking at it and said it looked good. I worked with Vanguard to determine what % to pull from each of my Vanguard funds within my IRA, filled out paperwork and started monthly auto distributions to match the annual required distribution. I chose the fixed payout and have 10% taxes withheld.
I'm not sure if the below answers your question or not.


"If you have multiple IRAs, you are allowed to take 72(t) distributions on only one account. You would then be able to save the other account(s) for emergency lump sum distributions (on which you would owe the penalty) or to create a second 72(t) distribution. You are also allowed to aggregate the IRA amounts and pull the total 72(t) distribution from just one of the accounts."

We also set up a "72(t)universe" with some of DH's IRAs but his monthly pull comes from just one of them, set up with CD ladders that mature as needed. It may not be the best way to do it, but it works for us.

He kept other IRAs out of the universe to pull out other funds as needed.



Sent from my iPad using Early Retirement Forum
__________________
Chief Retirement Strategist
The AR Group
Accidental Retiree is offline   Reply With Quote
Old 01-06-2016, 09:38 AM   #12
Recycles dryer sheets
 
Join Date: Sep 2008
Posts: 353
" You are also allowed to aggregate the IRA amounts and pull the total 72(t) distribution from just one of the accounts."

So, maybe I can total up my IRA balance for the calculation?
That's the big question.
I just like getting 1% at ALLY in the IRA savings account that would allow penalty free withdrawals. And earns at least something over a Vanguard MM. And like the idea of drawing from that for 5 yrs. But do not want to tie up the rest of my IRA at 1%.
Would like to set it up correctly and forget about it for 5 yrs.

Just wished Vanguard wasn't so stingy with interest.
__________________
"I couldn't wait for success, so I went ahead without it." Ret. 2013 @ 51.
almost there is offline   Reply With Quote
Old 01-06-2016, 09:49 AM   #13
Recycles dryer sheets
 
Join Date: Sep 2008
Posts: 353
Thanks! That's what I have been trying to find out.

"We also set up a "72(t)universe" "

https://www.irahelp.com/forum-post/15381-72t
__________________
"I couldn't wait for success, so I went ahead without it." Ret. 2013 @ 51.
almost there is offline   Reply With Quote
Old 01-06-2016, 12:17 PM   #14
Full time employment: Posting here.
Dog's Avatar
 
Join Date: Apr 2006
Posts: 781
Thanks for starting this thread. It reminded me to go and recalculate my 72t distribution for 2016 since I opted for the minimum distribution method. The annual distribution only changed by $400 for 2016
__________________
"Tell me, what is it you plan to do with your one wild and precious life?" - Mary Oliver
Dog is offline   Reply With Quote
Old 05-03-2016, 09:37 PM   #15
Recycles dryer sheets
 
Join Date: Nov 2014
Location: Texas
Posts: 164
Quote:
Originally Posted by almost there View Post
" You are also allowed to aggregate the IRA amounts and pull the total 72(t) distribution from just one of the accounts."

So, maybe I can total up my IRA balance for the calculation?
That's the big question.
I just like getting 1% at ALLY in the IRA savings account that would allow penalty free withdrawals. And earns at least something over a Vanguard MM. And like the idea of drawing from that for 5 yrs. But do not want to tie up the rest of my IRA at 1%.
Would like to set it up correctly and forget about it for 5 yrs.

Just wished Vanguard wasn't so stingy with interest.

Stingy with interest rates how


Sent from my iPhone using Early Retirement Forum
__________________
Terryjm51 is offline   Reply With Quote
Old 05-04-2016, 07:18 PM   #16
Full time employment: Posting here.
 
Join Date: Jan 2006
Posts: 684
Quote:
Originally Posted by almost there View Post
" You are also allowed to aggregate the IRA amounts and pull the total 72(t) distribution from just one of the accounts."

So, maybe I can total up my IRA balance for the calculation?
That's the big question.
I just like getting 1% at ALLY in the IRA savings account that would allow penalty free withdrawals. And earns at least something over a Vanguard MM. And like the idea of drawing from that for 5 yrs. But do not want to tie up the rest of my IRA at 1%.
Would like to set it up correctly and forget about it for 5 yrs.

Just wished Vanguard wasn't so stingy with interest.
I set my 72t up with Vanguard, and it was pretty easy, but as others said, most of the burden really falls on you. The first guy at Vanguard really didn't know that much about it.

Once I had a guy who understood what was going on, we created two, separate IRA's. One we called "Rollover" and the other we called "Traditional". The "Rollover" was the 72t basis. The "Traditional" was left alone for adding money to, but not withdrawing.

I think you are overcomplicating things with your worry about the Ally and 1% fund, just my opinion. Surely you can find a conservative account at Vanguard that can be low risk and low return. Mix in a little Wellington or Wellesley if you need to.

And drawing from multiple IRA's and multiple places (Vanguard/Ally) will likely complicate life a little, especially if you have to convince the IRS.

There is really no maintenance in my mind. Just take the same amount out each year.
__________________

__________________
48Fire is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Noticed more people holding signs "need work or food" rayinpenn Other topics 3 05-03-2015 03:51 PM
Maxing out pretax and taking 72t vs. taxable and no 72t whipsaw Young Dreamers 3 07-29-2014 08:26 AM
ER date set to avoid 72t nun FIRE and Money 18 03-17-2013 10:36 AM
Low risk options - am I missing anything? Sun456 FIRE and Money 12 03-07-2013 04:44 AM
To 72t or not to 72t, that is the question. nun FIRE and Money 12 05-18-2011 05:50 PM

 

 
All times are GMT -6. The time now is 09:35 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.