120%of rate

L1: 120%of rateReady to start distributions one question the 120% of currentrate by feds at 6%now when Istart taking distributions am I locked in to the rate at the time or doesthe rate change with each new Fed rate?
Thank you2006-07-10 13:08, By: Ken, IP: [68.212.172.22]

L2: 120%of rateKen,
Once you est. your SEPP you will be locked in until 591/2 or 5yrs, which ever is longer. But just b/c the current rate is 6% right now does not mean that you have to use all 6%. You are more than free to use anything less than the 120% max rate. If you need more money now than you will down the road but don”t want to take the 6% for the life of the SEPP you can do a one time switch from the amort. or annut. method to the RMD method, which will lower your withdraw amount greatly.
Hope this helps to answer your question.
Nick2006-07-10 14:10, By: Nick, IP: [205.135.136.10]

L2: 120%of rateSince Ken has not yet started his SEPP I think he also has the option of assuming that he will do an annual recalculation. There should be some previous discussions about recalculation in this forum.2006-07-10 14:22, By: John, IP: [71.208.223.242]

L2: 120%of rateI suggest a review of all the PLRs of interest posted on this site. You will note that there have been plenty of PLRs approving recalculation post 2002-62. However, all these appear to involve recalculating all 3 components of their 72t, not just the interest rate piece. It would be safer not to test use of fewer than all 3 components since you are already using a PLR and probably not wanting to pay the fees for your own PLR. 2006-07-10 22:46, By: Alan S., IP: [24.116.165.157]

L2: 120%of rateGood morning, Ken:
I”m not a great fan of the recalculation concept since, as Alan said, you have to include all 3 elements in your recalculation. My concern is rising interest rates and a falling market value of your accounts will accelerate the real dollars withdrawn, thusleading to an early demise of your funds. Best to set up multiple accounts and maximize withdrawal from the SEPP Plan account while holding the others in reserve to either start a new SEPP Plan or simply make penalty withdrawals for emergencies. Regardless of what you do, develop a sound plan with good contingencies when things go wrong. Note that I said “when things go wrong” and not “if.”
I believe that the most successful plan is one with stability.
Jim2006-07-11 09:05, By: Jim, IP: [70.184.1.35]

L2: 120%of rateMost people launching SEPP plans do so as either a partial or whole earned income replacement. As a result, I have always advocated that people very closely examine their monthly/annual/multi-annual expense patterns. Usually they learn that their expenses basically fall into two categories: fixed and variable; e.g. fixed are mortgage payments, food, utilities, etc. Variable are vacations, entertainment, new captial purchases that are discretionary, etc.
In this regard, I think people should always launch two SEPP plans;in a “matched funding” sense of the word; one plan to pay out fixed expenses and one to payout variable expenses. This perserves the one-time switch to the RMD method twice over and provides some intermediate conversion points which may or may not be implemented some years down the road depending on changes in personal financial circumstance.
Additionally, it then becomes more obvious that that the SEPP plan launched to match one”s fixed annual expenses should use the fixed amortization method as one does not what to go broke be unable to pay the mortgage or buy groceries. The second SEPP plan, launched to match against variable expenses can also use the fixed amortization method OR, for the risk taker, this second plan can be launched using annual recalculation in the hopes of achieving superior investment returns and therefore creating a larger distribution in subsequent years. However, the downside is obviously poor investment results including losses in which case it becomes time for some belt tightening but only with respect to variable expenses.
TheBadger
wjstecker@wispertel.net

2006-07-12 08:52, By: TheBadger, IP: [66.109.211.254]

L2: 120%of rateRegarding annual recalculation: “My concern is rising interest rates and a falling market value of your accounts will accelerate the real dollars withdrawn, thusleading to an early demise of your funds”
Actually, I think this is more of a problem if you DO NOT do the annual recalculation method.2006-07-17 19:20, By: Gary T, IP: [172.16.1.71]