L1: annual paymentI will be retiring on September 24th, 2011. My question is can I set up the 72t for 1 annual payment for the whole of 2011 to be paid in November and then another 1 annual payment for 2012 to be paid in January, 2012? Then subsequent payments in one lump sum every January until i am 59 and 1/2.I turned 51 in March,2011. I have 2 other sources of income that will be paid monthly.2011-06-29 18:18, By: atcdave, IP: [220.127.116.11]
L2: annual paymentYES. In the first calendar year you have a choice of either the full annual distribution or a prorated one based upon the month when you take the first distribution which can be less than the annual amount (but then you have to take the remainder of either the prorated amount or annual amount before 12/31).2011-06-29 18:27, By: dlzallestaxes, IP: [18.104.22.168]
L3: annual paymentthank you for your prompt response2011-06-29 18:31, By: atcdave, IP: [22.214.171.124]
L4: annual paymentSome additional detail – if your first distribution will be in November, you can use the highest interest rate for either Sept or Oct to determine your full annual calculation. You can then take that total amount in November for 2011 and in January for 2012.
However, by taking all your future annual payments in January, you will be under pressure to budget all that money carefully because you will have to wait an entire year to take your next distribution. If you want to, you can change your distribution pattern from year to year to monthly, quarterly or any pattern you want. The only requirement is that you withdraw the exact correct annual amount each calendar year.
Finally, note that if you take a full annual amount for 2011 in addition to your salary earned for the rest of the year, you may inflate your tax bracket for 2011. But your only other choice for 2011 when your first payment is in November is to take 2/12 of your annual amount, and that may not be enough to provide the reserve you need for the rest of your plan. So it’s a choice between that higher tax bill and having a surplus set aside as a safety margin for the rest of the years you are limited to your annual calculation. Inflation can be a problem over 8 or 9 years, so you may need the full amount for 2011 even though more will be lost to taxes.
2011-06-29 19:23, By: Alan S., IP: [126.96.36.199]
L5: annual paymentTo add to Alan’s point, I would suggest that you take the first as an Annual pmnt in late 2011, and then switch to monthly pmnts starting in JAN 2012, so you do not have the temptation to blow thru 2 yrs worth of SEPP payments in well less than a year. The monthly payments starting in 2012 will give you more discipline in how you spend it going forward, without letting you get yourself in trouble, while the full yr payment in 2011 is an opportunity to put aside a bit of a cushion and not spend it all in 30-60 days before the first monthly payment starts. I tried semi-annual at first in March 2006, and by JAN 2008, I made the calendar year change to monthly and loved it. With infrequent payments, you go from being “rich” to hoping the money does not run out before the next payment arrives 6 months later. Annual would even be more difficult. When on a monthly paymentcycle, it is so much better, and at the end of 2012, you would have received the same amount of money as if done in two annual payments that are 60-90 days apart. JMO. KEN2011-06-30 21:25, By: Ken, IP: [188.8.131.52]