Account balance and joint calculations

L1: Account balance and joint calculationsI have 2 questions that I would like clarified:
1.
I retired last year at age 54 and have not yet rolled over my 401k into an IRA . If I directly roll over the the 401k toa separate IRA in Aug 2007 and begin taking SEPP distributions in Sept 2007, what do I use for the account balance?
2.
I am currently married with my wife as the primary beneficiaryof the 401k.I would like to use the amortization calculation. If and when should I use joint calculation?
Thank you.
Frankie

2007-07-24 11:39, By: Frankie, IP: [69.37.111.209]

L2: Account balance and joint calculationsGood afternoon, Frankie:
Second question first. Generally you would use “Joint Calculation” when the age difference between you and your spouse is greater than 10 years since the Universal Table assumes a 10 year difference in it”s calculations. If your spouse”s actual age difference is greater than 10 years, then use actual ages and do the calculations.
You may use any reasonable account balance in your calculations.But to keep down the possibility of problems, use a balance of the IRA after the transfer and no more input is going to occur. With your short timetable to set up and begin distributions,you could have problems because trailing dividend and late company additions to the K-plan can really screw up your IRA account balance. So to avoid this problem in your case may I suggest thissomewhat, convoluted sounding process:
1. Process a trustee-to-trustee transfer of your K-plan assets to an IRA of your choice, usually a money market fund.
2. Set up a second IRA account with the same custodian and transfer overwhatever amount you will need to generate your desired SEPP monthly distribution amount. If your K-plan is sufficiently large enough and you don”t need all or most of this amount to fund your SEPP Plan, then you will have a nice “emergency fund” left in the first IRA you set up. In any case, make this second IRA your source for the SEPP Plan. Now you can transfer from the money market fund into the investmentfunds / stocks / bonds (whatever)of your choice and begin distributions.
My reasoning is that your first IRA account (non-SEPP) will be available to receive the late interest, dividend and company contributions that will inevitably occur in the old K-plan and which will automatically flow into the IRA account you used for the original trustee-to-trustee transfer. This keeps it from flowing into your SEPP Plan IRA and thus causing an automatic “bust.”
In the event you will need most of your K-plan assets for your SEPP Plan, then the first IRA will be very small. After the K-plan transfers are complete, then you can either leave this IRA as is or cash it out and pay the tax and penalty, which won”t be too great.
Jim2007-07-24 12:16, By: Jim, IP: [24.252.195.14]

L2: Account balance and joint calculationsUsing the single life expectancy would always produce a higher SEPP payout because it is designed to last through more than one life. Using the calculator here for 100,000 and amortization method I get the following annual amounts: Single 58 year old 7262; Joint 58 and 55 beneficiary – 6614; Joint 58 and 50 – 6436; Joint 58 and 45 – 6268.
This also shows that the Uniform table does not apply as it does for IRA RMDs; For the joint calculations Table II applies (joint and last survivor), so a different figure will be generated for each different beneficiary age. If the beneficiary gets old enough it would approach that of the single life expectancy.
To allocate the smallest account balance to a SEPP, you would always use the single life expectancy because it produces the highest payout per dollar of account size.2007-07-24 15:32, By: Alan S., IP: [24.116.66.98]

L2: Account balance and joint calculationsBy the way, since you are married,the beneficiary of your 401-K plan (and any pension plan) MUST be your spouse, unless you get the spouse to sign a waiver acknowledging that she is allowing you to name someone else as beneficiary. IRAs, on the other hand, can have ANY designated beneficiary. It doesn”t have to be your spouse..2007-07-24 21:06, By: dlzallestaxes, IP: [151.197.61.202]

L2: Account balance and joint calculationsAlan:
>Using the single life expectancy would always produce a higher SEPP payout
>because it is designed to last through more than one life.
I don”t understand this comment. Could you explain why the “single” life expectancy is “designed to last through more than one life”. To me, single implies one life while joint implies two lives.
Ed2007-07-26 21:27, By: Ed_B, IP: [67.170.159.37]