72(t) Friendly Brokers/Custodians

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Typ997S
Posts: 98
Joined: Fri Apr 06, 2012 12:36 pm

72(t) Friendly Brokers/Custodians

Post by Typ997S »

If anyone has had a "smooth ride" with their broker's handling of 72(t) transactions, could you please share who you have been successful with? I'm inclined to consolidate at Vanguard, but I'm aware of CS service issues there of course. If anyone has specific 72(t) experience, I'd appreciate hearing about it. Thanks.

I've been using E*Trade, and I've reached my limit of frustration...a quick summary:

Tax Year 1 - Mostly Fine, once unwritten requirements for process were revealed...

Tax Year 2 - Slow, but mostly OK, but I just got my 1099s and they have the wrong distribution code. Spent 45 minutes on the phone, we'll see if that corrects things.

Tax Year 3 (Right Now) - Complete disaster. Missed witholding on one distribution, then cancelled the other (wrong) one when I called about it. Then mislabeled transactions as RMDs as instead of 72(t). I've spent well over 4 hours on the phone the last two weeks, and I'm not sure I'm done fixing things, as the original transaction still hasn't been reversed.
Gryphon
Posts: 631
Joined: Sat May 07, 2016 11:43 am
Location: Missouri

Re: 72(t) Friendly Brokers/Custodians

Post by Gryphon »

My advice would be to leave your broker out of it. Just make your withdrawals, let the broker put distribution code 1 on your 1099-R, and file a 5329 with your tax return to explain that the withdrawal was part of a SEPP plan & not subject to the additional early withdrawal tax (exception code 2 on line 2). I've been doing that every year since 2017, no problems.
6NDone
Posts: 153
Joined: Tue Sep 28, 2021 5:01 am

Re: 72(t) Friendly Brokers/Custodians

Post by 6NDone »

Brokerage doesn’t matter, the less you involve them the better. To avoid that mistake in the future simply take one big distribution each year and then drawdown from that amount as needed throughout the year,
100% US TSM
retire2022
Posts: 3286
Joined: Tue Oct 02, 2018 6:10 pm
Location: NYC

Re: 72(t) Friendly Brokers/Custodians

Post by retire2022 »

Op

I don’t have 72t experience but what about Roth conversions?
sailaway
Posts: 8218
Joined: Fri May 12, 2017 1:11 pm

Re: 72(t) Friendly Brokers/Custodians

Post by sailaway »

retire2022 wrote: Sat Jan 22, 2022 6:29 pm Op

I don’t have 72t experience but what about Roth conversions?
OP has already started down this path; they must do so until the terms of the agreement expire (five years or 59.5yo, whichever comes last).
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