L1: 60-day window?First off, I love this site. Amazingly informative on this subject. OK, so I am contemplating setting up a SEPP. Birthdate:8/17/65. First expected distribution: 6/15/17. I retired on 10/9/16, and took a lump-sum distribution instead of a pension, and rolled it all into my company 401k. I did this within the 60-day window. I was told, at the time, that I could set up a SEPP through my 401k. Now, when I was about to set it up, they tell me I can’t. So I have to roll it over into an IRA. I was going to just do the direct rollover into the same company (Fidelity). My question is, this is beyond the “60-day window” (after I already took the lump-sum and put it all into my existing 401k account.) Is there any “penalty” that you know of, for rolling a large portion of my 401k into an IRA, after the 60-day window has passed? I’m just trying to cross all the “T’s”, and dot all the “i”s here. I have ~ $1,300,000.00, and want to move all but $150,000.00 into the IRA, and use the IRA portion as the basis for the SEPP.2017-05-09 18:43, By: SeppStan, IP: [22.214.171.124]
L2: 60-day window?Legally, a SEPP from a 401k plan can be done, but it is not a good idea because you have less control over contributions and distributions than with an IRA. Not sure what method you used for rolling the pension into the 401k, but if you did a 60 day rollover, there should have been 20% federal taxes withheld from the distribution, leaving you only 80% to roll over to the 401k. Hopefully, you used a direct rollover which avoids withholding.
The funds in your 401k or usually a part of that balance can now be directly rolled into your IRA account. 60 days is not applicable to direct rollovers, only to indirect rollovers where you receive a check made out to your personally. In addition, the one rollover limitation in 12 months ONLY counts for rollovers between IRA accounts. You are not doing a rollover between IRA accounts, so you can do the direct rollover to an IRA and start a SEPP from your IRA.
You might approach this by calculating how much of a SEPP distribution you need to cover your expenses for 7.5 years. Pad that figure by expected inflation. When you get that amount use a reverse calculation to determine the IRA balance you need to produce a SEPP calculation of the amount needed. You could then do a direct rollover of that amount from your 401k. If you have any highly appreciated employer shares in your 401k, leave them there because you could use them for NUA once you reach 59.5.
Or you could later roll the rest of the 401k over to an IRA and use that account for a second SEPP or for an emergency source of fundsto provide protection foryour original SEPP.2017-05-09 20:07, By: Alan S, IP: [126.96.36.199]
L3: 60-day window?Thanks so much for the reply and advice. You really need to put all this advice into book form. Would be a best-seller. I did initially do a direct rollover of my lump sum into my 401k, so there was no 20% withholding. The NUA advice was great, too! I never would have thought of that. Hopefully it will work out to my advantage in 7 years or so.
I feel much more confidant now about going ahead with this, thanks to this site. It’s amazing how 3 out of 4 financial advisers I spoke with, didn’t even know what a SEPP was! I really just don’t trust them at all. Where I worked, when they got wind that someone was retiring, it was like sharks with blood in the water. My phone rang constantly.2017-05-11 00:56, By: SeppStan, IP: [188.8.131.52]
L4: 60-day window?I disagree with your suggestion about a book. First, people would have to even know about SEPP 72-T before they would know to look for a book on the subject. Second, regulations change too quickly, so this website is more flexible and up-to-date than any book could be. Third, people ask many questions that we could never anticipate them asking, or that anyone could get themselves into a situation that they are now trying to get out of.
Fortunately, if anyone just googled SEPP 72-T, this website comes up. Unfortunately most ta practitioners and financial advisors do not even know that this website exists, or that SEPP 72-T is a PLANNING strategy.2017-05-12 17:36, By: dlzallestaxes, IP: [184.108.40.206]