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DirtyD
Posts: 4
(@dirtyd)
Eminent Member
Joined: 1 month ago
  • Date of Birth: 6/4/74
  • Age: 46
  • 72t Method: RMD
  • Life table: 37.9
  • Stub Year*: 20
  • Annual Recalc*: 
  • AFR* Rate: 1
  • Balance(s)* > 1m

Looking to enjoy life now is all, looking to start in July.  Read through a lot on here (thanks to everyone), and so want to confirm
I can use June 2020 balance as my starting point.
I prefer monthly, so for the current RMD, this will be just for the next 6 months and then I have to recalculate after Dec.
I can just take monthly distribution for the next 6 months and not have to take a full year distribution for 2020.

7 Replies
dlzallestaxes@msn.com
Posts: 50
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 1 year ago

You can take distributions in any frequency, and can change for any year. So, you can take your 2020 prorata or full distributions at any time in 2020 depending upon cash flow needs and tax considerations.

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1 Reply
DirtyD
(@dirtyd)
Joined: 1 month ago

Eminent Member
Posts: 4

Thanks for the quick reply.  And just for added clarity, I can not take out more, but I can take out less?  

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dlzallestaxes@msn.com
Posts: 50
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 1 year ago

No. Whichever method that you use, you are required to take out that amount. The most popular method is the calculation of a FIXED ANNUAL AMOUNT, that is also used for the prorated short first year. The RMD can go up or down, depending upon the value of the SEPP account as of 12/31 of each year.

We usually recommend that you set up an initial SEPP 72-T account only for the amount you think you need NOW for the coming few years. We pro ide a "REVERSE CALCULATOR" to determine the MINIMUM that you should transfer into the SEPP 72-T account. The rest of your IRA account(s) should then be set aside separately, to be used, if needed in future years to either set up another one or more extra SEPP 72-T plans. If at that future time you needed some extra money once, then it would be better to pay the extra 10% on just that distribution from the other SEPP 72-T account. Otherwise you will pay taxes on excess distributions that you may not need, rather than allowing more to grow tax deferred until stopping the plan at 59 1/2.

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1 Reply
DirtyD
(@dirtyd)
Joined: 1 month ago

Eminent Member
Posts: 4

That's a great idea with the reverse calculator and separate plans, will think about that some more. 

But back to clarity with a little math example.
If I am taking out 24k per year but on a monthly basis would be 2k/mo normally.  By starting mid year, pro-rated means I need to double that to 4k/mo so that I still take out a years worth?  Not the starting mid year, so cut the full year in half?

Thanks for your time and patience!

 

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dlzallestaxes@msn.com
Posts: 50
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 1 year ago

You have several choices in your example of starting in July -- either a total of $ 12,000 or $ 24,000 for 2020, depending upon your cash needs, timing, and tax situation. If you want/need only $ 12,000 in 2020, then your options are-- 6 mo. @ $ 2,000; 2 payments (July and any other time) @ $ 6,000; 3 payments @  $ 4,000 (July and 3 other times); 4 payments @ $ 3,000 ( July and 3 other times), or 5 payments @ $ 2,400  (July and 4 other times). Make sure to take the last payment 12/15 (not later in case they custodian screws up).

If you want/need $ 24,000 in 2020, as well as all future years, then double these payments, or take all $ 24,000 at any time before 12/15.

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1 Reply
DirtyD
(@dirtyd)
Joined: 1 month ago

Eminent Member
Posts: 4

Great, so I don't need to take a full year payment in my starter year.  But on following years, I do.

The SEPP Plan template, is there a downloadable version of that? Seems extremely useful and I could probably recreate it in Word or Excel if not.

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dlzallestaxes@msn.com
Posts: 50
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 1 year ago

If you go to the HOME PAGE, you will see "SEPP DISTRIBUTION CALCULATOR", MINIMUM BALANCE CALCULATOR (i.e. REVERSE CALCULATOR", and "TOOLS & RESOURCES". You might find some or all of the other items on the Home Page to be helpful, like "GET STARTED", "SUGGESTIONS", "Q&A", and I would start there. You might find topics and ideas that you had not considered. I worked with the creator to develop these, and they are being continually updated based upon tax developments and questions.

It has taken considerable time for the creator of this website (not me) to develop all of these items, and I see no reason for you to reinvent the wheel.

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