By Sarah Brenner, JD
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.
Question: 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?