SIMPLE IRAs and 72(t) Payments: Today's Slott Report Mailbag
By Sarah Brenner, JD
Follow Us on Twitter: @theslottreport
I am a financial advisor and want to be clear on something. If a client has a SIMPLE IRA that they are contributing to and have an IRA and are 70.5, can they aggregate the distributions for both and remove from the IRA?
Aggregation of RMDs is a tricky area and we see lots of mistakes. SIMPLE IRAs can be confusing as well because sometimes these accounts follow the IRA rules, and sometimes they follow plan rules.
When it comes to aggregation of RMDs, a SIMPLE IRA is treated like a traditional IRA. You can aggregate the RMDs from the traditional IRA and SIMPLE IRA and take the full amount from the traditional IRA.
I read with great interest your on-line article regarding 72(t) SEPP withdrawals at https://www.irahelp.com/slottreport/10-rules-know-about-72t. Thank you for the information. I was not clear about one point you made. You wrote that: "10. You may not roll over or convert your 72(t) payments."
I'm not sure how to interpret this. I understand you cannot do a roll-over into another tax-advantaged plan directly. What do you mean here by "convert?" I plan to contribute to a separate IRA while I am taking SEPPs. Is that not allowed?
While a 72(t) payment plan is a viable strategy to access IRA funds prior to age 59 ½ without penalty, the rules are complex and the penalties are harsh if they are not followed carefully. These rules require the payments to be taken and not rolled over to another IRA or converted to a Roth IRA.
However, the rules do not prevent you from establishing another IRA separate from the one with the 72(t) payment plan and making tax-year contributions to it if you are otherwise eligible.
Content Citation Guidelines
Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.
Please be advised that prior to distributing re-branded content, you must send a proof to email@example.com for approval.
For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.
For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.
Please contact Matt Smith at firstname.lastname@example.org or (516) 536-8282 with any questions.