Early Withdrawal

Archive for September, 2008

Changing 72t distribution methods

Can I change distribution methods once 72 t distributions have begun?

Yes.

Revenue Ruling 2002-62 allows the option for a one-time change from the amortization or annuitization method to the RMD method.

Anyone currently using the annuitization method or the amortization method is permitted to switch to the RMD method, without the change being considered a change in method for purposes of invoking the 10% excise tax.

Use of the RMD method for an early option of retirement allows the amount required to be distributed annually to fluctuate with market conditions.

Any other subsequent change will be a modification causing the 10% penalty to apply.

Changing 72t distribution methods Example 1:

Mr. Joe is supposed to take $1000/year under 72t using the annuitization method. As of today Mr. Joe has taken out $200. Mr. Joe wants to switch to the RMD method. The RMD calculation says the distribution should be $300. He only needs to take out an additional $100.

Changing 72t distribution methods Example 2:

Mrs. Smith is supposed to take $1000/year under 72t using the annuitization method except that as of today Mrs. Smith has taken out $600. Mrs. Smith wants to switch to the RMD method. The RMD calculation says the distribution should be $300. Must she take out $400 more under the old rules and wait till next year to start the RMD method? Or can she not take out any more this year since she has satisfied the RMD?

The answer is not clear. Of course, the safe thing to do would be to take balance of $400 this year and switch to the RMD method next year, ensuring an early option for retirement.

Question: Questions about SIMPLE plan. Which of the following statements is/ are correct?

Taylor, age 25, works for Pbay. Pbay adopted a SIMPLE plan 6 months ago. Taylor made an elective deferral contribution to the plan of $8k and Pbay made a matching contribution of $2.4K. Which of the following statements is/are correct?
1.Taylor can withdraw his entire account balance without terminating employment,
2.Taylor can roll his SIMPLE IRA into his Traditional IRA
3.Taylor will be subject to ordinary income taxes on withdrawals from the SIMPLE.
4.Taylor will be subject to a 25% Early Withdrawal Penalty on amounts withdrawn from the SIMPLE.

a.1 and 2
b.1 and 3
c. 2,3, and 4
d. 1,3 and 4

thank you very much!!!!!
i think the answer is d too

Answer: I too think its B. To get a better answer visit

http://www.missouribusiness.net/irs/sections/section11/simplefaqs.htm#15

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