Account Balance Date

L1: Account Balance DateI plan to retire in August of this year at the age 55. I plan to combine two IRAs with a lump sum distribution from a previous employer into a single IRA account to fund my SEPP. Since I will not receive this lump sum until May, I want to use the combined IRA account balance as of June 30, 2007 for the annual calculation. I want to start quarterly distributions on January 5, 2008. You recommend using December 31st of the previous year for this balance, but will June 30 create any issues? 2007-02-21 12:16, By: DJ Rider, IP: [63.105.51.10]
L2: Account Balance DateFrom previous messages on this forum comes this advice which you have already noted:
To comply with RR 2002-62, the initial valuation date should probably be the December 31 of the prior year, or on a date within a reasonable period before that year”s distribution.
Your question is would a June 30 valuation date fit the definition of “within a reasonable period before that year”s distribution”. I would guess that many SEPPs are started after Jul 1 and they may likely use the Dec 31 balance. Extending thislogic to your situation might suggest that your timing could be OK as well. But, let me offer a reason why using the Dec 31 valuation would be better. Assuming your investments will grow between June 30 andDec 31 you will be able to withdraw a larger annual amount with your SEPP.
There is one other item to consider that you will hear voiced on this forum frequently. Consider setting up two separate IRAs, one to fund your SEPP and a smaller one to use in case you need to access to some emergency funds. Yes, you”ll have to pay the 10% penalty if you withdraw from the smaller IRA but at least you can avoid breaking your SEPP.
Good luck.2007-02-21 13:00, By: John, IP: [71.208.231.158]

L2: Account Balance DateDJ:
I think John is saying that you probably can do as you are suggesting, but why? (John, feel free to correct me as needed.)
Since your first distribution will beJanuary 5, 2008, that will be the start of your SEPP Plan timing for the 5-year rule. Also, you will have to use the 120% FMR for either November or December, 2007, in your calculations. So why go back to June 30, 2007 for your account balance data?
Since your lump sum distribution will not be until May of this year, you may have problems with trailing dividend and interest or CG distributions, or even late contributions (employer or employee) going into the retirement plan which will automatically follow into your Rollover IRA after June 30, 2007. If this happensit will mess up your balance and you will have a “bust” from the get-go.
I agree with John that you should try to have an emergency IRA account outside the SEPP Plan. Now I have a new question based on the wording in your scenario. Do you have a retirement plan … DB or K-plan … with your current employer from which you will retire in August? If so then this may be a source of income that is not subject to the 10% penalty since you can use the age 55 rule. Or this may be the source of the emergency IRA.
Hope these thoughts help.
Jim2007-02-21 13:17, By: Jim, IP: [24.252.195.14]

L2: Account Balance DateLet me add my professional two cents, taking Jim”s scenario one step further. If you have a company retirement plan/401-k, find out if it has “company stock” in it. This is often the case when the company contributes its own stock to satisfy its contributions and/or matching provision. If that is the case, then discuss with a tax professional the benefits/nuances of “NUA” (NET UNREALIZED APPRECIATION) within company retirement plans (not IRAs). In many situations there can be tremendous tax savings by NOT rolling over those accounts into an IRA.2007-02-21 17:14, By: dlzallestaxes, IP: [4.175.9.249]

L2: Account Balance DateI already have two additional IRAs for emergency use.

My current 401K has only been active for 4 years so there are minimal funds in the account and I will check on the benefit of NUA.

Am I correct that I could use the account balance as of December 31, 2007 and start quarterly distributions on January 5, 2008?

2007-02-23 05:37, By: DJ Rider, IP: [68.90.157.3]

L2: Account Balance DateDJ,
It is my feeling that the 12/31/07 balance is the best one to use, but I have to warn you that it would be pushing it to get the correct year end balance, do the calculation fill out the form with your plan, and then request the first 72t payment to be made by 1-5-08.. It just seems to be tooshort an amount of time. You may end up settling for a first payment being issued about a week later than you had hoped, but that shd not be a big deal. Last year, I had to fund an IRA (that would be used for my 72t) from an ESOP rollover, then submit my written request to start payments onmy 72tto Schwab(using the plan documentation form that is provided on this website) for their approval, and then once approved, the first payment was setup and issued a few days later. I expect that you will have to do the same. Good luck. KEN2007-02-23 10:26, By: Ken, IP: [151.199.56.79]