Back end of SEPP
L1: Back end of SEPPClient wants to take a SEPP from his IRA. He turned 56 in December, what flexibility does he have on distributions starting within the year he turns 59.5? Must he take a distribution in 2019 or only ’14, ’15, ’16, ’17, and ’18? In 2017 (the year he turns 59.5) he must take his distribution amount but can he take more? Can he take more in ’17 but only after age 59.5? Or can he only take more starting in 2018? Or is there no flexibility?
2014-01-25 16:49, By: James Relocated, IP: [126.96.36.199]
L2: Back end of SEPPWhat is the date of birth and what is the planned starting date of the SEPP?2014-01-25 17:08, By: Gfw, IP: [188.8.131.52]
L3: Back end of SEPPBecause of his age, (already 56 before starting a SEPP) there is no flexibility in his SEPP plan for alteringthose calculatedIRA withdrawals each year until 5 years have passed since his first payment was received, even ifhe passes age 59.5 during that 5 years. If he thinks he may need more money at times in future years while the SEPP is running,he can split his IRA first, and make a second smaller one that is NOT in the SEPP plan calculations (before he starts) and by only using the $$ value in the larger IRA for his calulations, the other small IRA can be “tapped” after age 59.5 for withdrawals without penalty and without disturbing his SEPP IRA plan.2014-01-25 17:48, By: Ken, IP: [184.108.40.206]
L2: Back end of SEPPYou obviously know little about SEPP 72-T plans. You should read the information on this website. All of your questions would be answered there.
The basic regulation is that you must take the same ANNUAL CALENDAR YEAR DISTRIBUTION until the later of 5 years (i.e. 60 months) or 59 1/2. If someone is older than 54 1/2 when he takes his first distribution, then he must take them for 5 years. Most of the rest of your questions are therefore meaningless. The only exception is that in the first calendar year he can take either a prorated amount or a full annual amount. In the 5th calendar year, he takes the remaining prorated amount. All of your questions about age 59 1/2 cannot apply. He cannot take more in 2019 !!!! until 60 months after he starts his distributions in 2014. ( 2014 + 5 = 2019, not 2018 !!!!)2014-01-25 17:57, By: dlzallestaxes, IP: [220.127.116.11]
L3: Back end of SEPPOne clarification to what DLZ said (I think- but someone can correct me if I am wrong). If he took prorated in 1st calendar year and prorated in 5th calendar year, he would not have met the requirement of taking a full 5 years worth of payments. Same problem for full 1st year payment combined withprorated 5th year.2014-01-25 19:42, By: Ken, IP: [18.104.22.168]
L4: Back end of SEPPMaybe I wasn’t clear. If the annual amount was $ 12,000, and he took $ 9,000 prorated if his first distribution was in April 2014, then $ 12,000 in 2015, 16, 17, and 18. Then in his 5th/final year, he would take the $ 3,000 before 3/31/2019 that he didn’t take initially.
After 3/31/2019 the plan would automatically terminate, and he could take -0- or any amount after the April day he started, probably best to wait until May 2019.2014-01-25 21:53, By: dlzallestaxes, IP: [22.214.171.124]
L5: Back end of SEPPHe cannot take more than the annual amount in any year prior to 2019, and also cannot take out more than the annual amount in 2019 prior to the end of the plan.
The only good news here is that if he does take out more and busts the plan, the retroactive penalty and interest only applies to distributions taken PRIOR to reaching age 59.5, not those taken after that date even though the distribution that busted the plan may occur after 59.5.
To this point, if there is any concern about busting the plan, in the calendar year he turns 59.5 he should try to take his distribution after that date. If he later busts the plan, then this particular year’s distribution would not be subject to the penalty.
2014-01-26 02:17, By: Alan S, IP: [126.96.36.199]
L6: Back end of SEPPThank you all for your help, my client’s birth date is 12/14/57, he is mostly focused on maximizing withdrawals from the IRA, and will likely take the full 2014 payment in February. I’ll have him pull the full payment (approximately $35,000) here in February and every February including Feb 2019, then after that (maybe have him wait until May 2019) I’ll let him withdraw whatever additional amount he wants.
Thanks again for your assistance; it’s a great value on this tricky subject.2014-01-26 03:39, By: James Relocated, IP: [188.8.131.52]