72t set up & low risk investment options.

[almost there]

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!

[frayne]

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.

[Sunset]

Quote:

Originally Posted by almost there 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.

[almost there]

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.

[zinger1457]

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.

[frayne]

Quote:

Originally Posted by almost there 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.

[CyclingInvestor]

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).

[Sunset]

Quote:

Originally Posted by CyclingInvestor ...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.

[almost there]

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?
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Quote:

Originally Posted by CyclingInvestor 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).

[Dog]

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."

[Accidental Retiree]

Quote:

Originally Posted by Dog 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.



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[almost there]

" 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.

[almost there]

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

[Dog]

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

[Terryjm51]

Quote:

Originally Posted by almost there " 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


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[48Fire]

Quote:

Originally Posted by almost there " 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.