Bust a SEPP with Trading Costs

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L1: Bust a SEPP with Trading Costs
I am 46 years old born in 1972. I plan to roll an existing IRA with around $500k into a Roth IRA this year. After the 5 year waiting period for the Roth, I would like to start a SEPP program and take withdrawals based on the RMD method. Q: If I actively trade stocks within my Roth while the SEPP is in effect, incurring trading costs per trade, do these trading costs bust a SEPP۝?
2018-08-09 16:58, By: PaulS, IP: []

L2: Bust a SEPP with Trading Costs
Investments and Trading activities within any IRA, ROTH IRA, SEPP 72-T, etc. have no affect on the “busting” of a plan.
1. Have you discussed your “plan” with a tax professional, or a financial planner ?
2. Do you realize that you will need about $ 150,000 -$ 175,000 in funds outside of the IRA to pay the taxes on the ROTH CONVERSION ?
3. If you have any other taxable income in 2018, you will significantly increase the taxes on that income as well.
4. Why would you do a ROTH CONVERSION, and then set it up as a SEPP 72-T ? I don’t think that you understand the difference between these approaches, and the tax ramifications.
5. If you have significant outside assets, and do not plan to work in the next few years, you might consider just doing staged partial ROTH CONVERSIONS with some of your IRA, and set up a SEPP 72-T with another part of your IRA to provide taxes on your SEPP distributions and your ROTH CONVERSIONS. There is a lot of tax and financial planning that you should be going thru, rather than what appears to be a “this sounds like a good idea” approach without any analysis.
2018-08-09 17:40, By: dlzallestaxes, IP: []

L3: Bust a SEPP with Trading Costs
Thank you so much for your quick response. You are correct…now that I understand better the rules of these retirement vehicles I will work with a specialist to be sure it’s the correct fit for my specific situation.
2018-08-09 19:22, By: PaulS, IP: []

L4: Bust a SEPP with Trading Costs
If you tell us what you want to accomplish, and more about your situation, we might be able to give some ideas to consider. Also, this way you will better prepared to meet with a tax professional tax or financial advisor who understands these concepts.
2018-08-09 20:23, By: DLZALLESTAXES, IP: []

L5: Bust a SEPP with Trading Costs
PaulS, I highly suggest you bring any ideas on how you might handle your finances for retirement to this forum. I’ve been reading this site’s post and replies for about 2 years now. The people that reply (e.g. dallastxes, Alan, Gfw, and several others) are unbelievably knowledgeable on this subject and can help you A LOT on 72T and other related topics. Most financial advisors have little to no knowledge on 72T’s but the people on this forum are scary۝ smart on the topic. I’ve learned a tremendous amout from this site.
2018-08-09 20:50, By: Tanko, IP: []

L3: Bust a SEPP with Trading Costs
My plan۝ is appropriately placed in quotes as you have pointed out since it needs a lot of work. However, I am learning these amazing tools just recently (early withdrawals from a tax free Roth) and I’m blown away. My goal (as is everyone’s I assume) is to reduce the tax burden on this account as much as is allowable. But also, in the near future, start taking withdrawals. This year I am not working (my wife is). Therefore, for 2018, I was thinking we could file separately which could allow me to do a full Roth conversion on this account at a lower tax rate then we would normally have. Then, grow the Roth account over the next five years before starting an early withdrawal (RMD in SEPP?). Though past gains do not determine future rewards in the stock market, Ive greatly beat the market over the last 15 years and hope to continue that streak in this account through retirement. Therefore, I start early withdrawals but the Roth growth outpacing the withdrawals, thus upping my yearly rebalancing with the RMD. Starting withdrawals in 5 years is not a hard and fast need…it’s just the earliest allowable after the Roth conversion. Again, the plan۝ needs work, but right now I am learning the rules and laws so that my final plan after working with a tax strategist is solid.
2018-08-10 14:44, By: Pauls, IP: []

L4: Bust a SEPP with Trading Costs
MFS (Married Filing Separately) have special provisions that could thwart your “plans”. Check with a tax professional to guide you, or use tax projection software which has been updated for the new 2018 tax law.
Normally, the taxes would be lower filing a joint return.
2018-08-10 16:05, By: dlzallestaxes, IP: []