Account Balance for SEPP Calculation
L1: Account Balance for SEPP CalculationI’m planning to open a 72(t) soon. When determining the value of my IRA account for SEPP calculations, what leeway do I have as far as timing? Do I need to use the balance within a couple days of opening the 72(t), within the same month, last 30 days or other? Of course the balance goes up and down from day to day. I’d like to use the highest value for the SEPP calculations over the allowable period of time. Thanks.2017-07-07 19:37, By: MRMCA, IP: [220.127.116.11]
L2: Account Balance for SEPP CalculationThe account balance is typically limited to an actual balance no more than 6 months old, but it is equally important that the balance must be reasonable in relation to the current balance of the account. For example, regardless of the date of the balance used, that balance should generally not be more than 10% different than the balance when the plan is started. In addition, there cannot be any contributions or distributions between the date of the balance you select and the start of the plan. The most popular balance to use is the month end balance for the month before the month of your first distribution. In a steadily falling market in order to use a higher balance you could go back for a few months, but again should not use a balance more than 10% higher than the current balance. The IRS has not defined what is reasonable here, so the 10% figure is just my judgement call.
You also cannot use the balance in a different account than the account that will fund your plan. For example, if you are doing a 401k rollover and will fund your plan from the IRA your balance must be an IRA balance, not the 401k balance prior to the rollover.2017-07-07 20:09, By: Alan S, IP: [18.104.22.168]
L3: Account Balance for SEPP CalculationGreat, thanks Alan.2017-07-07 20:20, By: MRMCA, IP: [22.214.171.124]
L4: Account Balance for SEPP CalculationPlus it’s a good idea to have documentation to support the number that you use. I.E. a monthly or quarterly statement.2017-07-08 17:10, By: Red Baron, IP: [126.96.36.199]
L5: Account Balance for SEPP CalculationYes, you should always keep a copy of the full elements of your SEPP calculation including a copy of the account balance used for the calculation. A month end statement is the most safe and practical and can be secured from the custodian if you lost your copy for some reason. A screen print for any other day can also be used, but you must be sure that it clearly shows the date and account number (same account showing on your 1099R), but a screen print may be harder to replace if needed.2017-07-08 17:45, By: Alan S , IP: [188.8.131.52]