Ending 72(t) Withdrawals

[Guest John Prizer]

72(t) withdrawals must be continued for the longer of 5 years or to age 59 1/2. Does that mean that a withdrawal is required for the year in which age 59 1/2 is attained? Specifically have have a client who has been taking distributions for more than 5 years and will be 59 1/2 in 2013. Is the last year for which she is required to take a distribution 2012 or 2013. It seems logical to me that it should be 2012 since that is the last year in which the 10% penalty applies. Or is it? I guess a related question is does the 10% penalty apply until age 59 1/2 or until the year in which age 59 1/2 is attained?

[masteff]

http://www.irs.gov/retirement/article/0,,id=103045,00.html

The last Q&A on this IRS page affirms my understanding... the reg says "age 59 1/2", not the year you reach age 59 1/2. Therefore it is to the exact day.

[Guest John Prizer]

Thanks for the reply.

So if it is too the day and you are taking annual distributions, does that mean it ends in the year you turn 59 1/2 and therefore you do not have to take a distribution for that year? Or does it mean it continues into that year and you have to take a distribution for that year?

And alternatively, if you are taking monthly distributions, do you have to just continue the monthly distributions through age 59 1/2 or do you have to take the entire calendar year amount out?

[ETA Consulting LLC]

You are drawing two lines in the sand; one at the 5 year anniversary of first payment and the other at the date 6 months after the 59th birthday. You are continuing the stream of payments through the farthest line in the sand. If you've been taking annual payments for 8 years in December while you turn 59 1/2 in November, then you won't have to take another distribution after your 59 1/2 date.

In any instance, you're going to commit for a minimum of 5 years. When you discontinue, there are hard-fast dates.

Good Luck!

[Bird]

I think there's a presumption in the response that the systematic withdrawals have been taken on or about the same day each year, if they were annual withdrawals. I'm not sure if they must be or not (a quick glance at the RR just sees references to "for each year") but I would look back to the date of the first withdrawal and make that the determining date.

So...if the first withdrawal was taken on May 1, and the person turns 59 1/2 on July 1, then a withdrawal for that year would be required. If the first withdrawal was taken on Sept 1, and the person turns 59 1/2 on July 1, then a withdrawal for that year would NOT be required.