2 sepp plans
L1: 2 sepp plans
My Fidelity advisor is suggesting split my ira into 2 equal accounts and run 2 sepp plans concurrently. He says the income stream would be identical, but if the bad unforeseen event occurs,I would only have to bust 1 of the plans. I realize that this
would double my paperwork. What do you guys think?
2011-11-14 17:58, By: atcdave, IP: [220.127.116.11]
L2: 2 sepp plans
If you are running two 100%identical plans, you may have a problem convincing the IRS that you actually have two plans if you break one. At least consider starting them at different times so that there are possibly different distributions/interest rates.
If you haven’t already, start with our
Planing Pointers- determine your needs and plan accordingly. Also consider breaking your IRA into two parts and using one for emergencies and one for your SEPP.
2011-11-14 18:27, By: Gfw, IP: [18.104.22.168]
L3: 2 sepp plans
In addition to what gfw suggested, if you will have two independent plans, consider partitioning the IRAs in advance so that the account balance of the first plan to be started is around 80% of the total and the other is 20%.
If you have to bust one plan later, then you can bust the smaller one. If you start them several months apart, you can still take the full annual from one or both plans in the first year. Of course, you have to be very aware of the differences in each plan
and never confuse them. No transfers are allowed between plans like you could if you had two IRAs in a single plan.
The IRS rarely sees this approach, so although it does provide you with some “insurance”, it probably increases the chance of an IRS inquiry.
If you had a total balance available to you that is more than sufficient toproduce the income you need, you could alsochoose to have just one SEPP and the otherIRAwould be for emergency needs, butsubject to penalty. For
some emergenciessuch as medical or higher education costs, there are penalty waivers thatmight cover your distributions from the non SEPP IRA. If that happened you might avoid all penalties, but would have two different exception codes on your 5329 or 5329
2011-11-14 20:17, By: Alan S., IP: [22.214.171.124]
L4: 2 sepp plans
It is generally accepted that the more complicated something is, the less reliable it is because more moving parts offer more opportunities for something to go wrong. The simpler you can make a plan that meets your needs, the better off you will be. A
lot depends on the amount of money in your IRA, how much income it can throw off, and how much you need to support your lifestyle. In a lot of cases, people looking to start a SEPP will have more than they need to meet their expenses so will do as Alan suggests
by splitting their IRA into a large IRA and a small IRA. They start a SEPP on the large IRA and live with that for a while. If that proves to provide adequate funding, they leave the small IRA alone to serve as an emergency fund that they can draw on, if
necessary. Doing so will cost them a 10% penalty but if you need emergency money, this could be the least of your worries and avoids the need to bust your SEPP plan. If their large IRA does not provide all they need, they can start a SEPP plan on the smaller
IRA at that time.
2011-11-15 02:04, By: Ed_B, IP: [126.96.36.199]
L2: 2 sepp plans
Thanks for the input.
2011-11-15 16:59, By: atcdave, IP: [188.8.131.52]