Amortization Method SEPP
L1: Amortization Method SEPPI am about to start an SEPP and want to be sure that I cross all the t’s and dot the i’s. I used a Fidlelity Investments calculator to calculate the amount needed to withdraw $60,000 annually and came up with 1,067,700 as the needed account size. The Fidelity calculator is not a reverse calculator so I iterated until I got the withdrawal amount I was seeking. The inputs to the calculator were: my birthday, account balance, distribution start month and year, frequency of payments and interest rate (3.25%). Using your online reverse SEPP calculator I came up with an account size of $ 1,092,480. This scares me to death. Can you determine or guess why the difference. I assume the implications would be bad if I use a calculator that gives me the wrong account size and thus withdraw too much or too little thus busting the 10% penalty avoidance.2010-04-17 18:12, By: Ralph, IP: [18.104.22.168]
L2: Amortization Method SEPPThis topic comes up periodically – start by reading our article “Are Our Calculators Accurate”.
Then you may want to ask Fidelity why there is a difference.2010-04-17 18:28, By: Gfw, IP: [22.214.171.124]
L2: Amortization Method SEPPAre the implications of a wrong calculation a busted plan, ie invokation of the 10% penalty. One of the differences in the input was the total amount in IRA’s. Why is this needed for a reverse calculation in the Amortization Method?2010-04-17 18:39, By: ralph, IP: [126.96.36.199]
L3: Amortization Method SEPPThe purpose of the reverse calculator is to determine the amount needed to determine a desired annual distribution – without knowing the total IRA to use in the calculation, there is no point in doing the reverse calculation to determine how much should be used – merely take what you have and use it.
As stated before, contact Fidelity and ask them why there is a difference. I’m also guessing that you have your IRA at Fidelity – if yes, ask them if you use their calculator whether they will stand behind their numbers.
Even better, plug the assumptions used by the IRS in their examples into the Fidelity calculators and if they don’t match, ask them to justify the difference.
2010-04-17 18:48, By: Gfw, IP: [188.8.131.52]
L4: Amortization Method SEPPInterestingly, I plugged in the IRS scenario into the Fidelity calculator and exactly matched the results. In the Fidelity calculator I enter my birthday, month and year (August 1952). In this calculator I enter my age. When I enter my age at the time I plan to take the withdrawal which is July 2010 (ie age 57) the two calculators mismatch. When I enter my age as 58 in this calculator the outputs match. Could it be that this calculator recognizes your age 1 month ahead?2010-04-17 21:39, By: ralph, IP: [184.108.40.206]
L5: Amortization Method SEPPAge for purposes of a SEPP plan is your attained age as of December 31st of the year the distributions begin. If you enter the wrong data, you get the wrong results. This is the wording from our calculator help file… Owner’s Age: Enter the attained age of the account owner on December 31 of the year that distributions will begin.
Please take some time to read the FAQ or some other materials and most of your questions will be answered.2010-04-17 21:53, By: Gfw, IP: [220.127.116.11]
L6: Amortization Method SEPPThanks for all the help and info. I have purchased the “Practical Guide to SEPP” recommended from this website. After reading all the horrro stories it has made me a anal about the entire topic and so I want to leave no stone unturned however stupid the questions may be. Thanks again for the help.And bythe way I look a lot older than I am!2010-04-17 22:22, By: ralph, IP: [18.104.22.168]
L7: Amortization Method SEPPIf you start your SEPP anytime this year 2010 You will use the age of 58, which is what you will be on 12/31/10.2010-04-17 22:29, By: meb24, IP: [22.214.171.124]
L5: Amortization Method SEPPbelieve that you have to use your age as of the end of the year that you start your SEPP 72-T plan, even though you are using the IRA balance(s) as of the preceding 12/31.Maybe you don’t look your age.2010-04-17 21:58, By: dlzallestaxes, IP: [126.96.36.199]