401k rollover to IRA, impact on SEPP

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L1: 401k rollover to IRA, impact on SEPP
I am researching the idea of establishing a new SEPP in March. I’m turning 49 this year and my IRA is worth about $322,000. I have a job with a 401k. My idea is to give notice and transfer my 401k into the IRA, before I start the SEPP.
Are there potential issues related to the 401k rollover that I am not seeing?
For example, is it a problem to rollover a 401k and start a SEPP in the same year?
Can I rollover the 401k into the IRA after I start the SEPP?
I am curious about all the potential issues and options.
Thank you,
2018-01-03 23:58, By: Stephen, IP: []

L2: 401k rollover to IRA, impact on SEPP
Once you have left the company, you can roll over the 401k to an IRA and start a SEPP. Be sure there is no money left to be deposited in the 401k such as an unpaid dividend that might be rolled into the IRA by the 401k plan after you started the SEPP.
Starting a SEPP in the same year as a 401k rollover is not a problem.
After you take your first SEPP distribution, any deposits into the IRA will bust the plan. That is why you do not want any late dividends to your 401k rolled automatically into the IRA.
Suggest you read the SEPP planning pointers on this site so you will be more familiar with these plans. Note that a SEPP becomes more risky the longer it runs, and an 11 year SEPP is quite long. If the plan is busted after several years, you will owe a penalty on all prior distributions plus interest, and it is tough to predict how much money you will need over that long a period.
2018-01-04 02:16, By: Alan S, IP: []

L3: 401k rollover to IRA, impact on SEPP
Expanding on Alan’s comments about 11 years, we usually recommend splitting your IRA into at least 2 accounts. One would be set up using the REVERSE CALCULATOR to determine the MINIMUM amount that you can put into the SEPP 72-T plan to achieve your desired annual distribution. The second IRA account would be set up with the rest of your IRA funds to be used for any emergencies until you reach 59 1/2. That way you will not bust your major SEPP plan if you need additional distributions in the future, and will only pay the 10% early distribution penalty on those emergency funds. If you think at that future time that you will need extra monies over 5 or more years, then you can set up a second SEPP 72-T plan with part of the 2nd IRA account, and possibly keep some of it in a 3rd IRA account for any additional emergencies.
In answer to your other question, you are not allowed to transfer ANY monies into an IRA account designated as the basis for your SEPP 72-T plan. Technically there is no such thing as a SEPP 72-T “account” per se. There is only the IRA account(s) that are included in your SEPP “plan”.
2018-01-04 06:03, By: dlzallestaxes, IP: []

L3: 401k rollover to IRA, impact on SEPP
Thank you for the informative responses. Now I know my 401k options. I will read up more about the SEPP risks. I have zero intention to bust the plan.
Condo and car paid off, no kids, very low overhead
Substantial funds in a taxable account
No debts
$24,000 in a Roth for emergency situation
A substantial annual pension that’ll start at age 62
I live in a state with a basic health insurance plan, income, not asset based, that offers very low cost ($20 month) coverage up to 200% of the federal poverty level. I will keep my income under $24,000 a year to qualify.
IRA invested conservatively, 40/60 stock/bond mix
2018-01-05 23:52, By: Stephen, IP: []

L2: 401k rollover to IRA, impact on SEPP
If you take sepp at 49 you will pay the 10% ! Unless you’re in public service such as police
2018-01-04 12:11, By: Samson, IP: []

L3: 401k rollover to IRA, impact on SEPP
With all due respect, Samson, you do not know what you are talking about. You apparently do not even understand what a SEPP is.
“SEPP” stands for “SUBSTANTIALLY EQUAL PERIODIC PAYMENTS”. This is one of several EXCEPTIONS to the 10% Penalty for Early Distributions from a Retirement Plan ( 401-K, 403-B, IRA, etc.)
Your responses, or lack thereof, on your own posting will probably lead most, if not all, of us to not respond further to your posting.
2018-01-04 16:54, By: dlzallestaxes, IP: []

L2: 401k rollover to IRA, impact on SEPP
I rolled over my 401k into my IRA in 2016 and started a SEPP the same year. No issues. Just make sure the 401k is completely closed as mentioned above.
2018-01-04 19:22, By: brkr12002, IP: []