split IRA accounts for 72t withdrawals?


Dryer sheet wannabe
Feb 20, 2004
I was planning to start a 72t SEPP (substantially equal periodic payments) withdrawal , to start drawing out
some of the money while I am in a low tax bracket.

My tax advisor says that I have to calculate the withdrawal amount based on the total amount in my IRAs, not on the one account that I was planning to set up with an amount that would be tuned to the withdrawal I wanted.

I've done alot of searching and seen it both ways - use the IRA 'account' value or use the IRA 'plan' (total) value.

Has anyone done this based on just one partial account? Or does anyone know a reference to an IRS private letter ruling that says you can use the partial account?
I know that you can divide your IRA into several accounts and treat them differently. The SEPP rules apply to each one separately. You can leave one account untouched while drawing another down to zero.

In fact, knowledgeable people recommend that you have multiple IRAs because of this.

The expert on this matter calls himself TheBadger. I know that there are some free articles about SEPPs at www.retireearlyhomepage.com.

[Surprising to many, the IRS aligned itself with taxpayers during the market declines after 2000. They made some special rules allowing investors to reset their payment amounts after their portfolios took a big hit. Otherwise, they would have had to pay penalties for failing to maintain withdrawals beyond the time that their account balances hit zero.]

Have fun.

John R.
The best website about SEPP is http://72t.net/. Bookmark it. It's full of good info.

If you look through the FAQs, you'll see this:

Q. Do All IRA Accounts have to be combined to determine the amount of the distribution?
A. Individual retirement plans do not have to aggregated for purposes of calculating these payments. If a taxpayer owns more than one IRA, any combination of the taxpayer’s IRAs may be taken into account in determining the distributions by aggregating the account balances of those IRAs. PLR 9050030

Q. Can a portion of an IRA account be excluded from the calculations?
A. No, the entire account balance in each of the pertinent IRA's must be taken into account. A portion of one or more of the IRAs may not be excluded in order to limit the periodic payment to a predetermined amount. PLR 9705033

Q. If I include more than one account, which accounts do I use to make the payments?
A. If two or more IRA's are used in determining the substantially equal periodic payments, the distributions need not be made from all of the included IRA accounts. The distributions may be made solely from one of the accounts, or from a combination of the accounts. PLR 9705033

You have considerable flexibility.
...Has anyone done this based on just one partial account? ...
I moved assets among several different IRSa so that one would contain the amount I wanted to start with, and then calculated and withdrew the SEPPs from just that one IRA. As JWR1945 said, TheBadger is the expert. He used to have a very detailed online book on the topic; not sure if he has updated it lately or not, but it is/was at the Retire Early Home Page that JWR1945 linked.

thanks for the replies. I think I will go ahead and set up the withdrawal. Now off to set up health insurance, for when my Cobra runs out in August!
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