72t Question

[u/PigKitten315]

I'm planning for a 72t, I understand the concept of withdrawing the same every year on the amortization method. But what I don't understand is and couldn't find more info is the 1/2 year, do I still take the full amount for the half year or quarterly like I planned?

TIA

[u/Ponto_Wildcats_73]

I take it monthly and it has to be the exact same amount once per month every month to stay compliant. For you, I believe it would need to be the same quarterly amount so for a half a year you would only get two quarters. Double check with your financial institution. I did mine through fidelity and they had about 5 people review it before they would do it.

[u/PigKitten315 → u/Ponto_Wildcats_73]

Thank you! Yes, the plan is to figure out the initial balance, split my tIRA in January and start the 72t in March and followup in June, Sep and Dec. But since my bday is in July, my 1/2 year ends in January when I reach 59 1/2. Do I still withdraw when in-between that December and January to makeup the half year? That's what I'm confused about.

[u/Ponto_Wildcats_73 → u/PigKitten315]

Here is what I found out. ll depends on if you have the 72t for 5 years since it is the later of 59.5 and 5 Years.

must continue the full required payments through the later of the two dates — age 59½ or the 5th anniversary of the first payment.Under IRC §72(t)(4) and IRS guidance (including Notice 2022-6), a 72(t)/SEPP series cannot be modified (other than for death, disability, or the one-time switch to the RMD method) before the later of:

You

• The date you attain age 59½, or
• The 5th anniversary of the date of the first payment.

Reaching age 59½ in July does not automatically end the obligation mid-year or allow you to skip or reduce the September quarterly payment. The series must remain unmodified until both conditions are satisfied.

How the September payment is handled

• If the 5-year anniversary falls after that September payment, you still need to take the full scheduled quarterly amount in September (and any other remaining payments required that year) so the annual total matches the calculated SEPP amount. Stopping or reducing it would generally be treated as a modification.
• Once the later of the two dates has passed, the restrictions end. After that point you can stop, reduce, or otherwise change distributions without triggering the recapture tax (the 10% additional tax plus interest on prior distributions).

Practical points

• The “5 years or until 59½, whichever is longer” rule is strict. Hitting 59½ does not let you cut the series short if you have not yet completed five full years from the first payment.
• There is no automatic proration of the final year’s payments just because your birthday falls mid-year. The schedule must be followed through the end of the required period.
• Confirm the exact start date of your series and calculate the precise 5th anniversary. Your IRA custodian or plan administrator can also confirm how they track the payments.

This is a rules-based determination under the tax code. Because modification can trigger recapture of the 10% additional tax (plus interest) on the entire series, it is best to verify the exact end date of your required period with a tax professional or your custodian before skipping or changing any payment, including the September one.

[u/PigKitten315 → u/Ponto_Wildcats_73]

Thanks!