Re: 72 T Rules
I will be 50 in six months and plan to retire early under the ATC retirement.
Here is my understanding of the 72(t) and TSP. I desire to keep my money in the TSP but take the maximum allowed monthly under the 72(t) rules which would be using the amortization calculation method.
Anyway, when we file our TSP-70 to get the payments, on Line 23 we can either insert a dollar amount we wish to take out, or check the box that reads 'Compute My Payments' or something like that.
As I understand, if we check the box for them to compute for us, they will calculate a monthly payment that is basically the MINIMUM allowed 72(t) distribution based solely on life expectancy. With this method, the monthly amount is recalculated yearly AND the 1099 we get will be coded properly for the exception. For a rough example, with a 500k balance, this method would yield roughly 14k/year right now.
Now, if we want to get the MAXIMUM monthly amount possible, then we would have to do like I plan. That is DO NOT check that “compute my payment” box, but instead put in a dollar amount that is derived from us doing the calculations ourselves using the amortization method. This will result in obtaining the maximum monthly payout from your TSP under the 72(t) rules. With this method, our 1099 WILL NOT be properly coded for the exception and we will then have to file form 5329 when we file our 1040 to get the 10% penalty exception. The form looks easy enough. Line 1 - Amount received, Line 2 - How much of that amount is penalty exempt (all of it), and then a box for an exemption code which in our case will be 2 for a SEPP. Now, with this method, we CAN NOT, I repeat... CAN NOT recalculate yearly as that would result in us busting our 72(t) and having to pay the early withdrawal penalties on all money taken to date. As a comparison, on a 500K account, the amortization method would yield somewhere around 22k/year right now. That 8k/year difference is at least a car payment!
If anyone sees anything incorrect about what I posted above.. PLEASE set me straight as this is what my research has shown me to date. I just want to be sure I am on the right track.
BTW Clester. Our retirement place is in your neck of the woods just south of Rogersville just a bit.
Thanks.
Re: 72 T Rules
Sounds like you have a good handle on it. At age 59.5 you can start changing your payments each dec to whatever you want fir that year.
This will be my first year filing the 5329. I hope I don't get audited. You need to keep documentation on your calcs etc just in case.
I'll keep you informed.
Where are you working gmace?
100 G
RSI - Relative Strength Indicator DMA - day moving average
Re: 72 T Rules
I work at Washington Center.
Re: 72 T Rules
Nice. i had 8 years at ZTL before coming to tri atct.Originally Posted by gmace
100 G
RSI - Relative Strength Indicator DMA - day moving average
Re: 72 T Rules
24 years, all controlling at ZDC. I work the GVE/TEC sectors and the CLT/ATL flows, so we may have talked over the years.
I did put in a bid for a sup job at TYS about two years ago. I thought if I could stay working and still move to east TN, I might stay til 55. But now, glad it didn't work out that way. Now I'll move to east TN with nothing but fishing on my schedule.
Re: 72 T Rules
1099-R came from TSP yesterday - Block 7 (Distribution Code) is coded with a "2" for "Early Withdrawal - Exception Applies" -
So appears I'm good to go with not having to justify to IRS why/how the 10% penalty does not apply to me. Yea!
Re: 72 T Rules
Cool. Just to clarify, when you filled out your TSP-70 you selected the box to have TSP do your calculations resulting in minimum distribution? Correct
Has anyone who did their own 72(t) calculations using the amortization method and inserted that into the monthly withdrawal box get their 1099 yet? How did that show for you.
Re: 72 T Rules
I am doing the amoritization method and mine had a "code 1" from TSP as expected. Turbo tax asked all the right questions though and filled in the form 5329 for me.
Worked great and was easy!
100 G
RSI - Relative Strength Indicator DMA - day moving average
Re: 72 T Rules
Correct
The monthly payment under this method comes out about the same as the MetLife Annuity with inflation protection, survivor benefit, & cash refund feature. Difference being, the money is still mine and if/when interest rates and/or the market go up I can benefit.
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