Account Balance Figuring

You are here:
< Back

L1: Account Balance FiguringThis account will be a new SEPP. My birthdate is 06/19/1960 and Date of First Distribution is projected for March 18, 2013. I can start anyday, but plan to wait until after the 15th to see if the interest rate rises. I want to get the max amount possible from my account, yearly. I have 2 IRAs, and plan to leave about $90,000 in one with a CD for a year and consolidate the rest of my assets into one other account to use for the SEPP calculation. The other account is with a brokerage firm and the value is in stocks, bonds, mutual funds and cash. I know I need to assure there is always enough cash to fund the 1 time annual payout for the SEPP each year. But since my account overall value changes every month, due to fluctuation in the stocks, bonds, etc., can I use the most current end of month value for the account balance to figure the one time amortization amount to be used for the entire 7 years? My account has nothing to do with an end of the year dividend amount (12/31/12, example) as stated in the Rev. Rule 2002-62 .02 d) as a possible example. The stock prices and other values change monthly for total value of this IRA account. Please help or tell me who I could contact to see if I could definitely use this type account value. Thanks much!2013-02-12 09:34, By: Account Balance Figuring, IP: []
L2: Account Balance Figuring>>I can start anyday, but plan to wait until after the 15th to see if the interest rate rises. Interest rates typically come out about the 23th of each month. The interest rate released in March would be for April and only benefit a plan that was started in May.
You can use any account balance that is a reasonable representation of the account. The previous month end balance would be acceptable.2013-02-12 10:30, By: Gfw, IP: []

L3: Account Balance FiguringFor a March 2013 SEPP plan, you could use the balance as of the end of any months from Sept 2012 thru Feb 2013, or any day within any month. You usually will chose the month-end or day with the highest balance THAT YOU CAN DOCUMENT, which is why month-end values are usually used.
It is often suggested to split your IRA into 2 accounts, possibly 75% and 25%, so that if you have to “bust” a plan for emergency funds, the 10% penalty will be less by busting the smaller plan.
We usually suggest keeping a separate emergency fund as well in another separate IRA.
It obviously is based upon your needs, the total in your IRAs, tax situations over the SEPP period, etc. Remember that in the 1st calendar year you can take either a pro-rated amount or a full annual amount. Some people take the full annual amount so that they can use the extra money to set aside for future emergency needs without being subject to a 10% penalty or the possibility of busting a plan.
It takes PLANNING, and every situation is different.2013-02-12 15:54, By: dlzallestaxes, IP: []

L4: Account Balance FiguringThanks for the useful information. I don’t forsee busting the plan for any reason. But if I had to, will they tax the 10% off the total amount used to calculate the amount to be withdrawn? If the account used to calculate amount is $600,000, would they tax $60,000 with interest right off the top of the number you used to calculate your distribution? The only negative in having a separate amount just to fund the SEPP is that you don’t get to take near as much of a distribution. Isn’t that correct or no? Thanks2013-02-12 16:26, By: Account Balance Figuring, IP: []

L5: Account Balance FiguringThe 10% penalty is based upon the distributions taken, not the account balance.
However, it is 10% of the CUMULATIVE DISTRIBUTIONS. So, if you are fine for a number of years, but bust the plan say 8 years later after taking maybe $ 150,000, before reaching 59 1/2, then the 10% penalty would be $ 15,000, in addition to the taxes paid each year on those distributions.
That is why we look to have alternative sources of emergency funds in order to minimize the possibility of busting a single plan.2013-02-12 17:18, By: dlzallestaxes, IP: []

L3: Account Balance FiguringThank you for the response and useful information.2013-02-12 16:20, By: Account Balance Figuring, IP: []