Portfolio Changes

L1: Portfolio ChangesAm I correct in assuming I can change how my portfolio is allocated while taking my SEPP’s? I assume I can as long as my monthly payments remain the same.Also, I am not doing this, but if I should want to change from a Traditional IRA in a brokerage account to a fixedannuity or indexed annuity, can I do so during the SEPP periods as long as my withdrawals remain constant and the annuity allows for it without penalty?Thanks in advance!2010-06-08 13:41, By: none, IP: [68.196.243.173]
L2: Portfolio ChangesAm I correct in assuming I can change how my portfolio is allocated while taking my SEPP’s? I assume I can as long as my monthly payments remain the same.Yes, you can make investment changes within your SEPP Plan account(s) without it causing a modification to the plan which would trigger the 10% penalty.Also, I am not doing this, but if I should want to change from a Traditional IRA in a brokerage account to a fixedannuity or indexed annuity, can I do so during the SEPP periods as long as my withdrawals remain constant and the annuity allows for it without penalty?Yes, this would be an “investment change” and not a modification. HOWEVER, before making a change like this, study every aspect of using traditional fixed or indexed annuities as an investment. These products are fraught with “land mines.” Typically they have very large surrender penalties …. 10% to 20+%, and verylong surrender periods … 10 to 18+ years. This long surrender period can make the 5-year and age 59 1/2 restriction for a SEPP Plan look like a walk-in-the-park.Traditional fixed annuities pay a stated rate of return which, over time, goes down and does not increase. Their basic investment is in different types of bonds whose rate of return goes down over time, usually due to bonds being “called” so the issuer can get a lower interest rate which they have to pay out over the life of the bonds.Indexed annuities have a very positive feature: no negative returns. Their appeal is to capture some of the “market rate of return” by using an investment index(LESS ANY DIVIDENDS WHICH IS AN IMPORTANT ELEMENT)such as the S&P 500, NASDAQ, or some combination of these and other indexes, to determine how much interest will be credited each contract year,with no fear of losing money. However, if you review the S&P 500 for the last decade, you willfind a negative, averagerate of return of 10%. How much interest will be credited in that type of environment? Not much. So if you are making withdrawals you are eating into your principal rather drastically.I have conductedextensiveresearch on indexed annuities and have concluded they are not a goodinvestment vehicle for 5-10 year time horizons, which would apply to a typical SEPP Plan. With traditional IRA investments of stocks and bonds or their mutual fund equivalents, you will suffer loses when the market is either in recession or flat and moving side ways, like we have experienced for several years now. However, when the market does recover like happened since March 9, 2009 through the end of March, 2010, you will recover much more than you could with indexed annuities due to theirpositive-return caps which limit the amount of return you will earn. With traditional IRA investments you have more flexibility to shift from more volitile investments like stocks into bonds or even money market funds if you decide that you just can’t stand or choose not to endure the market volatility like we have now. Index annuities typically only allow shifting among indexes or fixed return elements once each contract year rather thanwhenever the mode strikes you with traditional IRA investments.Hope this helps.Jim2010-06-08 15:38, By: Jim, IP: [70.167.81.119]