My age is 56.92 . Will be 57 My distribution is 04/01/2018 give me some advice to make this as easy as possible distribution Are from a company 401k and didn’t know about the 5 year sepp. Does that applied to a IRA only also I heard I can’t roll it my 401 k to a IRA and qualified for the 10% no tax . My plan administrator said I need to be separated from service first never heard u mention separation from service before ?
2018-01-01 17:34, By: Samson, IP: [126.96.36.199]
I am not a financial advisor but will try give some information and some advice.
First, you say your first distribution will be 4/1/2018? Is this a distribution of the entire account? If yes, you will have to pay tax + 10% penalty on the entire balance. Really a bad idea.
Advice: Cancel your distribution. Since you are still working, try to avoid taking any distributions until you have retired. If you really, really need some money now, maybe you can take a loan from your 401k? But if you leave your company before a loan is repaid (leaving either voluntarily or involuntarily) you will have to immediately repay (within 60 days) the loan balance. If you can’t repay it the 10% penalty applies.
Most companies won’t let you rollover any of a 401k to an IRA while you are an active employee.
I _think_ you can take SEPP distributions from a 401k, but again, you probably can’t be an active employee. Maybe someone else can answer that.
2018-01-02 02:24, By: Cam, IP: [188.8.131.52]
What do you mean you are 56.92, that you will be 57 in Jan or Feb 2018 ?
It is best to give us your birth date.
There is an IRS provision that distributions from a 401-K are not subject to the 10% early distribution penalty if made from a 401-K plan is you are over 55 in the year of the distribution, and you separate from service in that year. Your plan must allow for partial distributions. If you use the search option on this website, you will probably find at least 100 responses about “separation from service” for 401-K plans.
There is another tax provision that can save you a lot of taxes if your 401-K plan has investments in company stock, made either by you, or more commonly made by the company when it makes its matching contributions. This provision is called NUA ( Net Unrealized Appreciation). Ask the plan administrator for the “cost basis” of company stock in the plan. ( J.K. Lasser, “Your Income Tax 2017”, has an excellent 2-page explanation of NUA employer stock contributions in 401-K plans.)
SEPP 72-T plans apply to both 401-K plans and IRA’s. Each plan is calculated separately if you have both a 401-K and an IRA.
How much is the 12/31/2017 balance in your 401-K plan, and in your IRA account(s) ?
How much money do you need in 2018 ? In each future year for the next 5 years ? We usually recommend that you use the calculator on this website to “reverse calculate” the minimum needed to include in your SEPP UNIVERSE to provide the annual distribution you want.
We usually suggest that someone your age try to use a SEPP as a last resort, because at age 59 1/2 you could take unlimited and varying distributions without any 10% penalty, and not be locked in for 5 years until you are 62+ if you start when you are 57.
SEPP 72-T plans are complex. There is no “easy” answer. Based upon your questions, you obviously do not understand your options. I suggest that you consult with a tax practitioner or financial planner who is knowledgeable about SEPP 72-T plans, NUA, etc.
2018-01-02 06:51, By: dlzallestaxes, IP: [184.108.40.206]
Let me try to clarify this spiderwebs of words that I created the distribution that I’m getting is totally separate in my 401k it’s a pension from that I’m fixing to retire the 401K is something I’m going to need because I’m physically not able to do the job anymore so I’m going to take a SEPP from my 401k I’m 57 and I’m going to need the money until I’m 62 and be able to collect Social Security hopefully that clarifies it. I hope it doesn’t come back to bite me just trying to avoid the 10% Penalty.
2018-01-02 20:16, By: Samson, IP: [220.127.116.11]
My company doesn’t allow us to buy any stock in the company yet they supposedly going to let us buy in this year
2018-01-02 21:51, By: Samson, IP: [18.104.22.168]
It might help if you actually wrote your post using punctuation instead of typing like you were on Facebook.
2018-01-04 01:02, By: CW, IP: [22.214.171.124]
RU this site’s English Teacher?
2018-01-04 12:42, By: Samson, IP: [126.96.36.199]
You seem to be intimidated by our questions. I asked you several on Tuesday, but you haven’t answered them.
We cannot help you unless you answer these basic questions. You obviously need a lot of guidance. We can try to help you at no charge, you can retain a professional advisor, or you can pay a lot of penalties by doing it wrong by yourself.
2018-01-04 05:54, By: dlzallestaxes, IP: [188.8.131.52]
As Dallas has said you need to provide more information? However, from reading thru I can surmise that you have a pension but will need funds from your 401k to make it to62? your biggest challenge is that your almost 57 so you will have a 5 year plan, so you won’t have full control of your funds until a full 5 years from your initial distribution date instead of 59.5. What is your date of birth and balance as of 12/31/2017?
2018-01-04 13:47, By: Scott, IP: [184.108.40.206]
Dallastaxes.Maybe I don’t know everything! but this site is called 72net and not 72 insults .
I went back and reread the post where you ask me some questions and I seen three of them the first one was my DOB 04/04/ 1961 the second one you asked how much I planned on taking out 401k yearly and that is 21,000 and 3rd.was net worth is 400,000 .My pension which I could not take out in a lump sum is going to be about 10,000 a year.
You seem to be the knowledgeable one on this site so please be patient and thank you for your help.
2018-01-04 20:23, By: Samson, IP: [220.127.116.11]
My apologies, but if you look at the string of postings above, none of this information was included before this.
2018-01-04 20:32, By: dlzallestaxes, IP: [18.104.22.168]
Is the $ 21,000/yr the amount that you want/need to take, or is that the amount per the calculator on this site ?
Do you plan to take the full annual distribution for 2018, or only the 9/12ths ( $15,750) for April thru Dec 2018 ?
Have you used the Reverse Calculator on this website to determine the MINIMUM amount that is needed from your IRA to fund the SEPP ?
(Note — You can access the calculators by clicking at the top on 72t/72q Plans, and then the other links on the left of that link.)
Also, you have not answered about your present situation. You mentioned that you have become disabled, and can no longer do your job. You did not indicate if you now have another position at the same company, or are no longer working for them, or for anyone. Or if you are planning to stop working for them in April. Have you determined if you are eligible for SS Disability, and related Medicare coverage ?
2018-01-04 20:46, By: dlzallestaxes, IP: [22.214.171.124]
Here is some information to help you give me some advice and options.
I am still working and my separation from service or retirement date isn’t until February 12 2018. I am not disabled and don’t plan to go on disability Social Security.
I had to wait till I was 57 so I can qualify for my pension it’s called the rule 85 at my company. I work for one of the two companies that leave packages at your door that’s why it’s hard for me to continue in this job. With that being said I don’t want to be locked in for the 5 years if I don’t have to and I would like to explore more options if there is any.
This 10% early withdrawal penalty something I would like to avoid.
I have no debt other than insurance and taxes the 21,000 a yr. is what I need I can live on that which equals out to be $1,750 a month I do not want a lump sum only 9/12 ths for 2018.
I didn’t do the calculation on this site . Forgot to mention I haven’t done anything with 401k until all my retroactive pay is done
2018-01-05 21:57, By: Samson, IP: [126.96.36.199]
ASAP ask your company if they will allow you to remain in their 401-K after you “separate from service” on 2/12/2018. Then ask them if they will allow you to take distributions from your 401-K for 2 1/2 years until you are 59 1/2. if so, then you do not have to roll over your 401-K to an IRA. The IRS will allow you to take distributions from your 401-K before 59 1/2 without being subject to the 10% penalty for early distributions. This exception is in the IRS code.
If so, you would avoid needing a SEPP 72-T, and would have complete flexibility, and not be locked in for 5 years.
You threw us a curve when you mentioned not being able to continue in your job in your initial posting, and by not mentioning your planned separation in Feb.
2018-01-06 00:56, By: dlzallestaxes, IP: [188.8.131.52]
thank you so much will do what u said and get back with you
2018-01-06 01:26, By: Samson, IP: [184.108.40.206]
If you are otherwise in good health, you should reconsider your plan to collect SS at 62. It is 25% less than what you can get at 66, and 70% less than you can get at 70. In addition, 15% of SS benefits are not taxed, so you keep even more if you wait until 70.
In addition, I usually take the distributions from the IRA for cash needs between 59 1/2 and 70. Besides all of the above advantages, at 70 1/2 you will have less for your RMD to add to your taxable SS benefits. It might result in even less of your SS benefits being taxed because of the IRS complex exclusion calculation.
I suggest that you retain a financial planner to project your situation thru age 72-75. This approach works well as long as you are healthy, and have a favorable family history of good health and long life. PLAN NOW before you proceed.
2018-01-06 01:45, By: dlzallestaxes, IP: [220.127.116.11]
This is what I found on my plans web site
1. Leave your assets in your former employer’s plan
If the plan allows, you can leave the assets in your former employer’s 401(k) plan where they can continue to benefit from any tax-advantaged growth.
Employees who leave the workforce after age 55 typically can make penalty-free withdrawals from their 401(k) accounts (income taxes still apply)an option not permitted until age 59_ for distributions from an individual retirement account (IRA).
Also, if you’re pleased with the plan, there may be no reason to change. Find out if you must maintain a minimum balance or if there are any fees for leaving your assets in the plan and be familiar with the plan’s distribution provisions.
Offers familiar investment options.
Maintains your investments’ tax-advantaged status.
Generally allows for penalty-free withdrawals if you leave your job in the year that you turn age 55 or older (although distributions are still subject to income taxes).
May provide access to investments that might not be available elsewhere.
May have a minimum balance requirement of $5,000 to remain in the plan.1
Subject to plan withdrawal provisions.
May have limited investment options.
2018-01-06 14:36, By: Samson, IP: [18.104.22.168]
It sounds like your company allows you to remain in your plan after “separating from service”. You will not need to roll over your 401-K to an IRA, and probably should not roll it over. You will be allowed to withdraw any amount at any time, and not be subject to the 10% penalty. You will not have to set up a formal monthly withdrawal plan. You will be able to take any amount that you want at any time, like for real estate taxes, etc.
2018-01-06 16:54, By: dlzallestaxes, IP: [22.214.171.124]