Account Balance for Calculation

L1: Account Balance for CalculationI retired October, 2002 at age 54. In January, 2003, I rolled my lump sum retirement pension into my 401K so that my current balance is significantly higher that Dec. 31, 2002 balance. Before I start my distribution, I am rolling some dollars into a separate rollover IRA for emergency money, i.e. if I need additional cash but do not want to bust the 72t. Therefore, I want to use the current balance (401K including pension dollars minus rolled out dollars) as the account balance for the 72t calculation. Is this OK? I do have documentation of my balances on a daily and monthly basis.
My SEPP distribution from the 401k will be quarterly (required by 401K plan). I will have 3 quarters in 2003, 4 quarters in 2004 – 2007, and at least 1distribution in 2008. Will this meet the requirements to prevent 10% penalty?My 1099-R will be type 2 and I will have to file a 5329 to avoid the penalty and want to confirm that the annual amount can differ in the first and last year of the 5 year period.
Thanks2003-05-15 07:44, By: bfl, IP: [127.0.0.1]

L2: Account Balance for CalculationHello bfl:
All looks fine to me; however, some comments:
1. Make sure you have some form of external evidence to establish the correct account balance after you move out the emergencty IRA monies.
2. You will not need to file Form 5329 as long as the the 1099R issued has a reason code of “2”.
3. Why are you keeping the bulk of your retirement assets in your employer’s 401(k) plan? Most people roll all of the assets out into multiple rollover IRAs for the increased flexibility and direct control.
TheBadger
wjstecker@wispertel.net
2003-05-15 08:24, By: TheBadger, IP: [127.0.0.1]

L2: Account Balance for CalculationI must have confused “type” for the 1099-R. The bottom line is that the 1099-R will indicate that I made an early withdrawal from a qualified plan and I will be using the 5329 to establish an exemption to the penalty. My employer changed the 401K SEPP distribution calculation method after I retired and now only uses the life expectancy method and Ineed to use the amortization method. I can also request a quarterly withdrawal for any amount. Therefore, I am performing my own 72t calculation, using your web site, and then asking for the annualamount in quarterly payments.
To your second point, my 401K has a income interest fund that pays an interest rate that is higher than the interest rate in the 72t calculation. Also, the 401k has flexibility as I can move dollars into numerous different investment funds, such as S&P Index, Bond, Balanced and 5 additional funds. The administrative fee in negligible. I haven’t seen anything from the numerous meeting that I had with financial planners that has both the security and flexibility as my 401K. Also, the fund is managed by Fidelity and I think that I can roll it over into a Fidelity Rollover IRA and keep thewithdrawals asthey are and still meet the 72t rules. I am still investigating this additional option. 2003-05-15 11:48, By: bfl, IP: [127.0.0.1]