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SEPP using Vanguard forms. Please check calculation.
- Date of Birth: 06/16/1971
- Age: 48
- 72t Method: Amortization Method
- 72t Distribution Start Date: Oct 10, 2019
- Life Table Used: Single expectancy
- Stub Year (Y/N): N
- Annual Recalc (Y/N): N
- AFR Rate: 2.5 % (July 2019 rate)
- Account Balance(s): 885,000
Questions: Have calculated SEPP using amortization method using my 401K account with single expectancy (36 factor from IRS table), with AFR rate of 2.5% and investment rate of 4%, the distribution amount is $37,569.65 and would like to start distribution this year Oct 10, 2019 to last 11 years? Please check if my calculation are correct?
Need to ask about using distribution from 401k savings plan while applying SEPP 72(t) rule with Amortization method, as we are asked to complete Vanguard "Installment payment request" form. As Vanguard agents insist on using life expectancy (single or joint) ONLY to avoid 10% penalty and asking me to file IRS form 1099R (box 1 will be checked not 2) and in addition Form 5329 (to report retirement income) on my tax filing if I were to avoid 10% penalty? However, the IRS table for single expectancy they are using generates lower yearly payment cause they are not using the applicable federal interest rate? What are they missing and how can we make sure I elect correct method to setup correct withdrawal/distribution once to avoid the 10% penalty as per SEPP 72(t) rule from my 401K account? The three options form provide are 1) fixed amount, 2) declining balance (with number of payments years) and 3) life expectancy (which I have been forced to pick). My hunch is that they are calculating the SEPP amortization method wrong (and using Minimum distribution Method instead) while not considering the interest rate factor besides single life expectancy? Please advise
Thanks I recalculated with August rate of 2.24% coming out to be $36,073.36. I already have allocated separate IRA and Roth IRA (post tax) for rainy days. Yes I will be 12% tax bracket hence full amount is what I am looking for, can you also comment on the Vanguard form selection of single life expectancy they are getting lower amount close to $24000? Do you have formula how to calculate the amortization method with interest rate?
Should I calculate myself and pick fixed amount of the vanguard form? As Vanguard mentions only way a 10% penalty is avoided is by picking single expectancy, I am schedule to talk to a CPA but not many knows about 72t rule in general?
Syed, 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.
I have followed up on the advise to have "fixed amount" after calculating it with amortization method (Nov. 2019 AFR rate of 2.13%) , start date of SEPP Jan 20, 2020 to last another 10 years or so? Vanguard wants you to complete the " "Installment payment Request" form and it is pretty straight forward to complete.
I spoke to several CPA's but no adequate answer in regards to 72(t) rule all gave the same answer to file 1099R + form 5329 (as mentioned above) and ask me to revert back during filing times, so in a nutshell it boils down to my filing time next year in 2020 or 2021 (since I started distribution in 2020 fiscal year). I know my income bracket moving forward (plus needs) so I feel comfortable starting SEPP plan now. Thanks for all the support here.......appreciate the candor....