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Can I start a second SEPP/72(t) On Another IRA?

Last Updated August 31, 2011

Question: 

Is it permissible for me to start a second 72(t) Payment on a separate IRA, when I already have a 72(t) Payment Scheduled on another IRA?

Answer: 

Yes. You can do a 72(t) for each of your IRAs.

Generally, 72(t) calculations are done on a ‘per account’ basis. This allows the IRA owner to make additional non-72(t) withdrawals – if necessary- from the other IRAs, without affecting the 72(t) schedule of payments.

Additionally, if the IRA owner feels that he needs additional amounts on a consistent basis (as opposed to a one-time or infrequent basis); he may start a new 72(t) schedule of payment on another IRA.

 

Example 1

TJ has an IRA balance of $500,000.

He wants to take 72(t) payments from his IRA, in order to avoid the 10 % early distribution penalty.  However, the $500,000 would produce much more than TJ needs. Therefore, TJ split the IRA into two IRAs (IRA #1 and IRA # 2), and takes the 72(t) from IRA #1.

 

Two years later, TJ needed an additional $5,000 to cover a one-time expense. He withdrew that amount from IRA # 2. This did not affect the 72(t) on IRA # 1.

 

Example 2

Assume the facts are the same as in Example 1. Except that TJ needed additional funds on a consistent basis, as his living expenses had increased significantly. TJ decided to take a second 72(t) payment schedule from IRA #2.

This is permissible, and does not affect the 72(t) under IRA # 1.