Discussion Forum
This forum is provided for informational purposes and it not intended to be relied upon as a source of investment, tax or legal advice. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of the 72tNET.com owners, or the sponsors or firms affiliated with the author(s). Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Please read our Forum Rules.
BEFORE POSTING: Use this TEMPLATE when submitting a new post. Make sure you understand all terms used in the template and double check your answers before submitting your question. Carefully review the SEPP Planning Pointers and materials under the Tools and Resources menu (IRS Resources, Glossary, and Applicable Federal Rate table) before posting to make sure your question is clear and the answer you receive is accurate.
Subscribe to posts or edit your subscriptions by clicking on this link https://72tnet.com/community/subscriptions/ .
PLEASE NOTE: To avoid confusion, please do not add your question to someone else’s thread. If you have a question, please create your own post.
- Date of Birth:02/22/1971
- Age:48
- 72t Method:amort
- 72t Distribution Start Date:12/22/2019
- Life Table Used:Single
- Stub Year (Y/N):n
- Annual Recalc (Y/N):n
- AFR Rate:2.03
- Account Balance(s):1515033.71
I just retired from my job in October and plan on doing a Sepp plan in December when my company stock is liqudated in my 401k.
I also have a loan that I have to pay back in the amount of 11287.68. Can I take the money directly out of the 401k and pay off the loan with a 10 percent penalty and then start the sepp plan? Also since they only liqudate stock once a quarter I will get the next stock bump/decline in December. Can I start a plan before the stock liquadation or will I have to wait until after ?
I would wait for the next liquidation, pay off the loan, and then start the SEPP 72-T. Since you retired in October, I would expect that you have significant income already in 2019. I guess that you want/need the ANNUAL total distribution in December, in addition to the annual distribution in 2020, etc., despite the high tax bill for 2019, rather than waiting until Jan 2020 to take the annual distribution when you will be in a lower tax bracket. I would have your tax professional run both options for you.
Do you expect to not work for the next 11 years ? If so, you might also look at doing an electronic TRANSFER of your 401-K (after repaying the loan) to a TRADITIONAL IRA. Then in 2020 you can start to take distributions of $ 12,000 a year with -0- income tax because of the $ 12,000 standard deduction, and pay only the 10% penalty of $ 1,200.
Also, look into other exceptions that you might qualify for, especially medical insurance if you will be collecting Unemployment for at least 12 weeks, or medical expenses in excess of 10% of your AGI.
Finally, if you are working for a profitable company, check into the Special IRS provisions for NUA (Net Unrealized Appreciation) in company stock, which could save you a lot of taxes.
All of these options should be considered before starting a SEPP 72-T plan.
Tyroneshu, I created a new thread for your questions so they're no longer hidden under the "template". Let me know if you have any trouble accessing or viewing the posts.
