Balance for setting up a new SEPP
L1: Balance for setting up a new SEPP
I am setting up a new SEPP and have just completed rolling a 365,000 401K into my pre-existing 250,000 traditional IRA. So my new account balance in the IRA is 615,000. I would like to take my first distribution this year in November. Will I be able to use an account balance after the rollover into the IRA (August) or do I have to work with the much smaller 12/31/2017 account balance of the IRA? Or possibly the combined account balance of 401k and IRA on 12/31/2017? Birthdate 6/12/1966 Awesome site. Thank you.
2018-08-12 23:06, By: Russ, IP: [126.96.36.199]
L2: Balance for setting up a new SEPP
You can use the IRA balance on any date after the 365k rollover up to the date of your first SEPP distribution as long as no other contributions or distributions are made during this period of time. The only exception would be if your account balance experienced major gains or losses, perhaps over 15% of the balance on the date of your first distribution.
To clarify, if the market tanked and your 615k IRA dropped below 523k, then 615k would no longer be a “reasonable approximation” of the value of your account at the time of your first distribution. The 15% is not a firm rule, therefore actual reasonable approximation is subjective, but would create a risk if you exceeded this arbitrary figure.
You cannot use values in accounts other than the IRA account which funds your SEPP, therefore the earliest valuation day would be the date your rollover is credited to your IRA balance.
If the 615k will produce a higher payout than you want, you should transfer the amount to another IRA account that will generate the payout you need, and the amount you do not need can be kept in a separate IRA that is not part of your SEPP and not included in the initial account balance.
2018-08-13 04:22, By: Alan S, IP: [188.8.131.52]