I have been dealing with pancreatic cancer and time has gotten away from me. I haven't had a chance to call Vanguard yet but google has failed me.
What are the actual physical steps you take within Vanguard (traditional IRA)?
I know that it will be based on the balance at the end of the previous year and December 31 is less than a week away.
Secondary question: Is there anything I need to do before the end of this year to be able to start the 72(t) after the new year besides record the balance on the 31st?
Help Actually Setting Up A 72(t) With Vanguard
byu/jgatcomb infinancialindependence
Posted by jgatcomb
4 Comments
Sorry that you are dealing with that cancer diagnosis. I hope that they found it early enough that you have options, that is rough.
For the 72t, I would strongly advise you call Vanguard and have them double check everything over the phone. It will be worth it to make sure you don’t make any bad mistakes.
1.Do the calculation for the amount of money you can withdraw. Withdrawal money.
2.Vanguard will tell you, you are under 59.5 and may incur a penalty.
3.You will get a 1099 from Vanguard at tax time.
4.Fill out form 5329 when you do taxes that you have established a -SEPP with your IRA and don’t owe a penalty.
There is nothing to set up through Vanguard. They and most brokerages will not “establish” a 72t. That’s between you and the IRS.
You will be responsible for taking out the correct amount every year and for the duration of the SEPP.
Here is a good walkthrough on the 5329 form : https://youtu.be/DhapZh6kBwg?si=89q5T1fDSkG8nqvf
As for your secondary question, just keep that statement from December.
TLDR. I believe there is an early withdrawal waiver for terminal illnesses.
You can run this yourself by just requesting the same fixed distribution and filing Form 5329 to log the exception.
But if I were you, and I know this is annoying, I would consider a transfer to Fidelity. They have a form where you can ask them to operate the SEPP and they’ll handle the distributions each year and code them with the correct exception code so you don’t have to file Form 5329.