Account value to use for 72(t) calculation
L1: Account value to use for 72(t) calculationI want to calculate a new SEPP. I haverolled-over an existing IRA into a Variable Annuity that funded on May 21, 2008 at $116,557. I want to take my first distribution on June 21, 2008 (which is allowed by this VA without surrender charges). My firstquestion is what value do I use to calculate the the SEPP, Dec 31, 2007, or can I use the valueat the time of the rollover? Secondly, I am going to use the amoritization method, so the annual payments will never change,and I ultimately want to take the payments monthly. Should I take one annual paymentthis year (2008) and start monthly paymentsin Jan 2009?2008-05-28 10:05, By: 72in(t)erested, IP: [220.127.116.11]
L2: Account value to use for 72(t) calculationWhile using the 12/31 balance would likely not cause a problem, I would avoid testing the waters and use the initial value of the annuity as your account balance. You could also use a later balance up to the day prior to ordering your first distribution as long as you can make a hard copy of the balance on the given day for later documentation. Be sure that there are NO dividends or other trailing assets that are yet to be moved out of the IRA, or you will have to reconstruct your plan.
For 2008, you can distribute either 7/12 of the annual amount or the full annual amount. It does not matter how you schedule the distributions as long as one of those two amounts is your total distribution from 6/21 through year end. Same for next year although you must take the full annual amount. If you opt for monthly installments, make them early in the month so you can make a correction in December when you double check to see if the correct annual total has been distributed.2008-05-28 17:16, By: Alan S., IP: [18.104.22.168]
L2: Account value to use for 72(t) calculationAlan”s statement …
“Be sure that there are NO dividends or other trailing assets that are yet to be moved out of the IRA, or you will have to reconstruct your plan.” …
is critical. Because of this problem caused with transfers, if you get in too big of a rush to start distributions you can have a real problem should more funds flow into the new VA after your first distribution. Jim2008-05-29 07:50, By: Jim, IP: [22.214.171.124]
L2: Account value to use for 72(t) calculationIf you stick with taking your payments on the 21st day of the month, you could have trouble correcting any errors in the distribution that occur in December. This only leaves you 10 days to correct any problems that come up and a number of those days are holidays and weekends. Most SEPP owners take their distributions before the 15th of the month to give them some extra time to correct any problems that come up before the end of that year arrives.
Other than this, you have a lot of flexibility in when you take the distributions. They have to be at least annually but semi-snnually, quarterly, and monthly are also acceptable. You can start with 1 annual payment for all of 2008 orpro-rate it to 7/12 as Alan mentions. You can also change the payment frequency at any time, so whatever you do for 2008 does not put any distribution frequency requirement on you for subsequent years. It is probably best to do such changes in January for that entire year, instead of changing payment timing during a particular year. While you are allowed to change the payment fequency at any time, beware of errors in payment amount busting your SEPP. A careful watch on your annual payment amount is critical for a successful SEPP.Ed2008-05-30 08:33, By: Ed_B, IP: [126.96.36.199]