72t Recalculation Date

L1: 72t Recalculation DateI recentlystartedmy 72t/SEPP distribution plan with annual recalculations. I receive my distribution on the 1st of the month. My question is, if I recalculate in mid-January using the 12/31 balance of my account (as seems to have been suggested on this site), my new distribution amountwould not go in effect until Feb 1 and my annual distribution for that yearwould be incorrect given that my Jan 1 distributionwas at the old rate. Should I not recalculate in mid-Decemberusing mid-December balances and appropriate interest rate so that my Jan 1 distribution is at the new annual rate?
Thank you in advance for yourthoughts. This site has been most helpful to me as I have navigated through through the various trials and tribulations of setting up my SEPP plan.
Les2005-10-24 20:15, By: Les, IP: [65.112.145.53]

L2: 72t Recalculation Dateyou should be followingthe plan thatyou adopted – what are the terms of the plan? When does the plan say that the recalculation will take place?
Remember that with a SEPP, monthly payments don”t mean much, it is the annual payment that counts.2005-10-25 04:16, By: Gfw, IP: [172.16.1.71]

L2: 72t Recalculation DateMy plan is currently set up to perform the recalculation in Mid-January using the 12/31 account balance and appropriate interest rate. I also realize that it is the sum of the monthly distributions that matter for reporting purposes. This is where I get a little confused. If I do the recalculation in Mid-January then I will have 11 months at the new monthly distribution rate (Feb thru Dec) and 1 month at the previous monthly rate (Jan). The sum of these monthly distributions will not likely equal the result of the mid-January calculation for that tax year.
I guess my questions are:
1) Is this potential difference an issue, I’ll assume that it is…
2) Would an acceptable solution be, to “adjust” the amount of the monthly distributions resulting from the recalculation such that the sum of the monthly distributions, including the amount received in January, equal the recalculated annual amount. 2005-10-25 13:24, By: Les, IP: [66.82.9.32]

L2: 72t Recalculation Date
Yes, it is an issue – stay within about $1
Or… request an extra amount in addition to the regular monthly withdrawals that together with the monthly withdrawals will equal the calculated annual payment.
Good luck 2005-10-25 13:27, By: Gfw, IP: [172.16.1.71]

L2: 72t Recalculation DateLes:
Since you are setup for distributions on the first of the month and your annual recalculation is setup for January 15, why don’t you change the date for your monthly distributions? It’s probably too late to get November changed but you should be able to get December and all future distributions changed to sometime between the 25th and 28th day. This way you will be able to do the recalculation by mid-January, and then have 10 to 13 days to make adjustments with your custodian for the new year’s distributions.
The date of first distribution is important to determine when you can make changes or when the 5-year rule will be satisfied. If you are doing monthly distributions, don’t worry that you don’t get 12 months in the first year. Be sure you get all of the dollars required for distributions in the 2nd and following years, subject to your recalculations.
Good luck.
Jim2005-10-25 13:37, By: Jim, IP: [70.184.1.35]

L2: 72t Recalculation DateThanks Jim and Gfw for the info and quick replies. I will check to see about changing the distribution date to the 28th. I have indeed just started my plan and changing the distribution date shouldnot impact this first “stub” year. This seems like thebest solution for making the recalculation mathsimpler and I suspectsimpler math equals less chance for error.2005-10-25 14:35, By: Les, IP: [66.82.9.32]

L2: 72t Recalculation DateBINGO!2005-10-25 14:40, By: Jim, IP: [70.184.1.35]

L2: 72t Recalculation DateI use the annuitization method for my 72(t) distribution. When I began last January the reasonable interest rate used was 4.20. Now that interest rates are rising, can Irecalculate? I thought this was allowed only using the minimum distribution method. 2005-11-01 07:49, By: francis3, IP: [141.154.213.93]

L2: 72t Recalculation DateIf, when you adopted the plan, there was a provision for annual recalculation, then next year you could recalculate. However, if when you adopted the plan, there was no provision for recalculation, then the 4.20% interest rate is stable for the life of the plan.
You should probably have done a little more research and study before implementing your plan, or you should have contacted a professional that would have assisted you in the design.2005-11-01 09:08, By: Gfw, IP: [172.16.1.72]

L2: 72t Recalculation DateI don’t mean to muddy the waters here; but, I guess I will. Everyone should plan once, twice, and a third time before commencing a SEPP plan. Furthermore, it is inevitably the 1st actul cash distribution that, more orless, locks everything in stone, about 95% of the time.
So what’s the 5%? Conversationally, the IRS has admitted that “in reality” a taxpayer has until 12/31 of the 2nd year of his SEPP plan to elect annual recalculation using the amortization or annuitization methods.
Do I think it’s right? Not particularly.
Do I think a whole bunch of other options & alternatives got lost in the wash? Yes.
TheBadger
wjstecker@wispertel.net
2005-11-01 09:47, By: TheBadger, IP: [66.250.23.21]

L2: 72t Recalculation DateActually, I did have a professional set up my 72(t). The annuitization method gave me the largest monthly distribution of the three choices. My understanding was that the only time during my pre – 59 1/2 period that I could make a change was if I decided to go to the minimum distribution method, and I could only make one change within my 72(t) duration.
The distribution request I filled out with Vanguard noted that “If you are taking SEPPS using the required minimum distribution method, you must contact Vanguard each year to provide us with the new installment amount.” That’s why I believed that this method was the only one eligible for interest recalcs.
My understanding was that the amount I receive is now locked in for the duration unless I want to receive minimum distributions (which I don’t).
That’s why I’m surprised (or confused) that I would have been able (or still am?) to recalculate my interest rate yearly using the annuitization method if I had arranged for that ‘provision’.
Regardless, is there a downside for those who are able to recalculate?
I really enjoy this site and I’m learning a lot! Thanks 2005-11-01 10:18, By: francis3, IP: [141.154.213.93]