72T mid term rate

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L1: 72T mid term rateWanted to say thank you for all the great insights on Sepps. I will start a SEPP next year when I am 56. I am going to move some of my IRA money into an account to fund my SEPP. I have a couple of questions. One, can I use 5% as the mid term rate? I know it is a moving target, but I wanted to do the paperwork this month, and I know the prime rate just dropped. I think I read somewhere that I can use the rate for the two previous months before the start of the SEPP (Jan 2008).Second, how do I calculate my account balance? I will be moving the money over in early December, but being it is in a stock portfolio, how do I know exactly how much it will be when the SEPP begins. Can I just use the original amount that I moved into the special account for the SEPP?Thanks for any help you can give me on this.Ken2007-11-02 20:15, By: kburl, IP: [72.47.188.84]
L2: 72T mid term rateHello kburl:
Implicitly, most of us here advocate planning a SEPP plan in reverse; e.g. target the annual distribution 1st; then use the reverse calculator here to determine the principle amount needed in an IRA to fund that distribution. For a SEPP plan starting in January, 2008 you can certainly use 5%; you can also use 5.28%.
Secondly, most SEPPer”s create a separate IRA account (just as you are doing) to fund their SEPP plan and tend to do so with any of a dozen or more big brokerages (discount or otherwise). All of these brokerages have online sites that permit you to value your account daily; e.g. hop on at 7:00 pm at night and do an up-to-date account valuation printout as of any day. Any of these printouts is sufficient to establish an account valuation for SEPP computational purposes. Or, you can move assets in December & simply wait to get your 12/31/07 statement in the mail and use that account valuation.
TheBadger
wjstecker@wispertel.net
2007-11-03 05:53, By: TheBadger, IP: [72.42.66.61]

L2: 72T mid term rateKburl,
You can use 5% as your chosen rate as long as the posted rated for one of the two months preceding the month of first payment is at least 5%. In other words, a chosen rate that is less than the allowable max rate for your first payment is OK. Right now, your 5% can be used inSEPP with either DEC 07 or in JAN 08 initial payment, since theNOV ”07 rate is over 5%. If you set up a plan using 5%, and start it beyond Jan 08, you must make sure (before it starts) that one of the 2 newer rates that would apply to your first payment are still at least 5%, i.e.,if starting in March 08, you could use either the JAN or FEB 08 posted max rate to compare to your desired 5%, and if one of them meets the criteria, you are OK. From my readings on this site, the transferred balance would be fine, if it is within 6 months of starting your SEPP (as I recall)but if you are not starting until some time beyond January 08,I think you have time to use the 12/31/07 balance to prepare your SEPP calculations. It should not take your custodian more than 2-3 weeks atmost to get the plan started, and you can also request a one time catchup initial payment (If you want to collect a full year of SEPP payments in first year) so in my March initial payment example, you would tell them thatthe first paymentwouldcover the first three months of 2008, then they would make equal monthlypayments thereafter. This would give youall 12 monthly payments in 2008, even if it starts a bit late. That is not required, but you can choose to ask for that kind of payment plan.You would need to specify in writing exactly what you want to get this. I did it with Vanguard in May 2007, and it worked fine. Good luck. KEN
2007-11-03 06:03, By: Ken, IP: [75.67.65.254]

L2: 72T mid term rateThanks for the prompt answers. I think that clears up all my questions. I will keep some extra money set aside in another IRA in case my budget forecast is not accurate enough. 5 years is a long time to predict!Ken2007-11-03 08:33, By: kburl, IP: [72.47.188.84]