51 year old wanting to start SEPP
L1: 51 year old wanting to start SEPPHi, I’ll be 51 in November.
I have 1 million in investment assets, with just over 650K in a 401K from my last job.
I’ve been walking dogs as an interim, but can live on 36K or less annually. Would love to do a SEPP plan until 591/2. Just want to make sure I do it right.
Hope to begin plan in early July or August, latest.
My thought is to start with the amortization calculation (since it doesn’t have to be recalculated annually) and move to the minimum distribution if necessary due to lower than expected returns.
I would make up the rest of my income with funds from my taxable brokerage account and Roth IRA.
Does this sound sensible?2015-06-03 19:05, By: Sparkle, IP: [188.8.131.52]
L2: 51 year old wanting to start SEPPSounds like you’ve thought it out well. Just keep reading this site and you’ll be just fine. Your plan will run longer than 5 years, so you can take a full annual distribution this year, or pro rated based on how many months. Post up all your information prior to let others give you a double check. I retired at 51 (in the year I turned 52) in 2012 and I’m completely happy with my decision. I felt confident in my 72T based on reading the information contained in this site.2015-06-05 17:50, By: Scott, IP: [184.108.40.206]
L3: 51 year old wanting to start SEPPThank you, Scott, for the reply.
As of 5/31/15 my account had 652,788.50 and I will be 51 in November.
So I divided the account total by 33.3 to get $19603.26 and will divide by 2 for pro rating 6 months.
I’ll likely have a CPA “bless it”. Did you do that?2015-06-05 19:32, By: Sparkle, IP: [220.127.116.11]
L4: 51 year old wanting to start SEPPYou made the statement that you divided by 33.3 – are you using the minimum distribution method that requires annual recalculation based on attained age?
Do you get the same results from our calculator?2015-06-05 19:39, By: Gfw, IP: [18.104.22.168]
L4: 51 year old wanting to start SEPPYou would get approx $27,200 using the amortization method. Use the calculator again. Your post is saying you want to use amortization method but your dollar amount and the 33.3 is actually the RMD method.2015-06-07 17:14, By: Bailey’smom , IP: [22.214.171.124]
L5: 51 year old wanting to start SEPPYou are correct. My innate fear has me focused on the smaller amount. But if I begin with that, I can’t change the method. I’m talking with a CPA today. I just want to be sure I do this correctly and am not certain I understand the amortization method…it’s not as simple as the RMD.2015-06-25 18:47, By: Sparkle, IP: [126.96.36.199]
L6: 51 year old wanting to start SEPPI do presentations on SEPP 72-T to tax practitioners. I can count on two hands the number of CPA’s who know anything about the nuances of this area, or even this website. And the number who know about NUA can be counted on one hand.
My point is, being a CPA is not a criteria for being able to advise in this area. As a matter of fact, 40% of CPAs are in Industry, Academia and Non-Profits; 40% are ACCOUNTANTS & AUDITORS preparing Financial Statements and Auditing company internal systems for adequacy of controls and reliability of figures being reported. Of the remaining 20%, 10% of CPAs are partners who do managing of engagements or rainmaking to obtain clients. Therefore, only 10% of all CPAs actually prepare tax returns for individuals. As someone who passed the entire CPA exam on the first sitting, I have been fighting for years for the AICPA to stop their nonsense position that all CPA’s are equaling qualified in all areas of accounting. I believe that they should be divided into the above areas of specialization.2015-06-25 19:00, By: dlzallestaxes, IP: [188.8.131.52]
L6: 51 year old wanting to start SEPP>>am not certain I understand the amortization method…it’s not as simple as the RMD.
Actually it is simpler and leaves less chance for error. The amortization method stays level once calculated. The MD method requires an annual calculation – at age 51, that is about 8 years where a new calculation is required – 8 possibilities for a calculation error. 2015-06-25 19:02, By: Gfw, IP: [184.108.40.206]
L7: 51 year old wanting to start SEPPCan you help me understand the method? I feel better that I could go back to RMD if things change.2015-06-25 19:12, By: Sparkle, IP: [220.127.116.11]
L8: 51 year old wanting to start SEPPHave you used the amortization method? And if so, did you end up switching back to RMD?
Really appreciate this input.2015-06-25 19:16, By: Sparkle, IP: [18.104.22.168]
L9: 51 year old wanting to start SEPPMy fear is that if I calculate incorrectly, the whole thing is doomed. I used an excel spreadsheet and did the formula =PMT(652,788.5,.0245,33.3) and didn’t come up with the amount mentioned above. Just need to be sure I’m doing this correctly. Thanks for any input and assistance.2015-06-25 19:47, By: Sparkle, IP: [22.214.171.124]
L10: 51 year old wanting to start SEPPUse the calculators on this website. Since you are going to see your accountant, print the page and take it with you.
For cross checking, use our calculator and input the IRS example assumptions released with RR 2002-62. And since you are going to see your accountant, print the page and take it with you.
In trying to use Excel you are merely trying to re-create the wheel
2015-06-25 19:57, By: Gfw, IP: [126.96.36.199]
L11: 51 year old wanting to start SEPPThank you. I am just very cautious and want to understand the math. Can I be sure about the calculator here?2015-06-25 20:14, By: Sparkle, IP: [188.8.131.52]
L12: 51 year old wanting to start SEPPHopefully my last question. The calculator uses 2.04 as the interest rate. The June midterm is 2.04. So couldn’t I use 120% of that or 2.448?2015-06-25 20:16, By: Sparkle, IP: [184.108.40.206]
L13: 51 year old wanting to start SEPPYou really need to start over and learn what you are doing – maybe your accountant can be of help, but based on your questions, you may end up with a few problems.
The interest rates that we publish are the 120% rates. And if you start in June the rate that you can use is the higher on the April or May rate. The June rate can’t be used until July. 2015-06-25 20:22, By: Gfw, IP: [220.127.116.11]
L14: 51 year old wanting to start SEPPI appreciate your comment.
I just want to be sure I’m doing this correctly. Thanks for letting me know the rates are 120%. That’s a huge help.
That should make this easier.
I was getting, 27,202 for amortization and 19,603 for RMD. And I still get that on the Lord Abbott site. But the calculator on this site is showing lower numbers for some reason.
I’d just like to be sure I’m using the correct numbers. Thanks so much.2015-06-25 20:42, By: Sparkle, IP: [18.104.22.168]
L15: 51 year old wanting to start SEPPThanks so much for putting up with my questions. I changed to single life expectancy and everything went back to the correct numbers. Very much appreciate you.2015-06-25 20:49, By: Sparkle, IP: [22.214.171.124]
L16: 51 year old wanting to start SEPPWith regard to changing from AMORT to RMD method, I did exactly that after 3 years of my SEPP using AMORT method, and made sure it was changed at beginning of a new calendar year. I had to compute the new RMD amount for that year, and then recomputed itagain for one more year until my SEPP ended.It worked fine, and I was glad I started with AMORT, so I hadthe flexibility to make that switch to RMD method and lower my withdrawal quite a bit (after we sold one of our homes, and I no longer needed the extra withdrawal).2015-06-26 03:56, By: Ken, IP: [126.96.36.199]
L16: 51 year old wanting to start SEPPGood morning,
I was reading your questions and I was wondering if you considered taking your income from your non-retirement accounts first? It would be more flexible (not locked into SEPP rules) and possibly more tax efficient? Just a thought from a financial advisor, not a tax pro . . .2015-06-26 14:41, By: Drew, IP: [188.8.131.52]