L1: Annual Recalculation
I am doing some research to determine the best way to access retirement funds and the annual recalculation of the amortization method is intriguing as it allows for adjustment if the portfolio decreases. Is annual recalculation still an option/method for a SEPP plan? Do you have to file your SEPP plan with the IRS to avoid having tax issues? Finally, I’ve read that if the account runs out of money before reaching 59.5 then you aren’t subject to the 10% penalty or back interest, if that’s the case what stops you from taking the most out as you can to gain maximum flexibility?
Thanks for any information you can provide,
2019-01-10 19:25, By: Matt, IP: [184.108.40.206]
L2: Annual Recalculation
I’ll answer some of your questions.
1. No, you do not file anything with the IRS to document your SEPP 72-T plan. You need that information only i you are unfortunate to be audited.
2. Your point about running out of money because you took out so much over the years is not really applicable. The primary or only reason that a plan would run out of money would be because of abysmal performance of the investments. In general the annual distributions are about 3%-4% (based upon a life expectancy to age 85), and these are taken usually only to age 59 1/2, or a couple of years later if you started your plan after age 55.
3. The annual recalculation of a declining balance would result in a decline in the annual distribution. If the balance increased significantly, then the distribution would increase, but not close to the amount of the increase in the portfolio itself. But, usually people use the one-time change to reduce the annual distribution because they need less, possibly because they re-entered the workforce.
2019-01-10 21:03, By: dlzallestaxes, IP: [220.127.116.11]