Calculating the amount of the annual SEPP distribution.

L1: Calculating the amount of the annual SEPP distribution.We will be starting a SEPP for my wife’s IRA with the distribution to begin on May 15th 2013. Her DOB is 2/15/1957. I am moving $600,000 to a separate IRA for the SEPP. She will take the entire annual distribution in a single payment each year. My question is that the “exact” balance of the IRA will vary daily depending on the closing price of the stocks and bonds in the IRA, so what balance do I use for the calculation? Should I use the balance on “the day” the distribution is to be made? I understand this calculation needs to be exact to the penny but the balance of the IRA varies daily.
Thx Sombrero Steve2013-04-22 17:41, By: sombrerosteve, IP: [68.189.5.77]

L2: Calculating the amount of the annual SEPP distribution.You can use any balance starting about 12/31/2012 until the day before the plan is set up. The highest value datecan be used, but usually a month end date is chosen to get an “official” month-end statement with values, rather than some interim day’s online listing that could challenge more easily.
I assume that you have no alternative for the next 3 1/4 years until she is 59 1/2 on 8/15/2016. You do realize that by starting now, you lock up all of this money until 5/15/2018 which is 19 months later than if you did not set up a SEPP.
Have you considered splitting up her IRA account into several different accounts, with different starting points, maybe with another one starting in 2014, and another in 2015.2013-04-22 18:39, By: dlzallestaxes, IP: [98.111.190.136]

L3: Calculating the amount of the annual SEPP distribution.I would just like to add the following:
By taking a full distribution this year you won’t be able to take a disbursement in 2018 until 5/16/2018. This will be the day after the plan expires, because it is a 5 year plan.2013-04-22 20:10, By: Scott, IP: [69.109.8.16]

L4: Calculating the amount of the annual SEPP distribution.I plan to take a single annual disbursement on May 15th 2013, 2014, 2015,2016, 2017, & 2018 as I understand the SEPP rules.2013-04-22 22:25, By: sombrerosteve, IP: [68.189.5.77]

L5: Calculating the amount of the annual SEPP distribution.You will have3 options in 2018 —
1. Take a full distribution in 2018
2. Take -0- in 2018
3. Take 5/12 of an annual distribution in 2018.
Those are your only options in 2018.2013-04-22 23:27, By: dlzallestaxes, IP: [98.111.190.136]

L3: Calculating the amount of the annual SEPP distribution.No………..no alternative. I understand the 5 year lock. This will be a stand alone IRA with just the $600K moved from other IRAs. Can I use the value of the IRA on 4/31/2013 to calculate the payment that will begin on 5/15/2013?2013-04-22 22:22, By: sombrerosteve, IP: [68.189.5.77]

L4: Calculating the amount of the annual SEPP distribution.Yes, but you can take 12/31, 1/31, 2/28, or 3/31 month ends, or any specific dateduring any month in 2013 with a higher value.

SEE MY LATER RESPONSE 2 ABOVE THIS ONE, ABOUT YOUR OPTIONS IN 2018.2013-04-22 22:27, By: dlzallestaxes, IP: [98.111.190.136]

L5: Calculating the amount of the annual SEPP distribution.STEVE– To simplify this, use the value of the NEW IRA, after you moved the $600,000 into it, (or its opening value) since it sounds like you haven’t created it yet. You can’t use a value for your calculations until the IRA has been created, so disregard the example of using 12/31/2012, or others datesin this case.
You just need a hard copy printout of the IRA and the value of it, that is dated, to back up your calculations. Also- After 5/15/2018, when the five years have passed, you can taken anything out that you want without penalty, so the 2018 options DLZ listed are also incorrect in your case after 5/15/2018, since your wife will be over 59 1/2, and more than 5 yrs have passed since first payment was received. Ken2013-04-23 02:20, By: Ken, IP: [108.20.30.158]

L6: Calculating the amount of the annual SEPP distribution.Sorry. I was looking at it so that she could stop taking distributions in 2018. But you are right. If she wants to continue taking distributions without penalty. then my options are only thru 5/15/2018. You are right that after 5/16/2018 she can take any amount from -0- to the entire balance left in the account.2013-04-23 03:32, By: dlzallestaxes, IP: [98.111.190.136]

L7: Calculating the amount of the annual SEPP distribution.Steve,
Your wife’s plan is a 5 year plan, because she turns 59.5 prior to the expiration of meeting the minimum 5 year rule. In a 5 year plan only 60 monthy, or 5 annual payments may be taken. In your L4 post you show 6 payments. Again, should you choose a full annual payment upon its inception you should avoid taking a distribution in 2018 until the day after the plans expiration.
Also, as Ken has pointed out. Any reasonable date may be used from the account prior to distribution. A printout of the account on 5/14, or any date prior as far back as 12/31 of the prior year may be used. Any day after funds are transfered to create the account, or the day prior to distribution will be acceptable.2013-04-23 13:07, By: Scott, IP: [69.109.8.16]

L8: Calculating the amount of the annual SEPP distribution.Sombrero Steve,
To expand a little on what Scott said…
If you are taking annual payments, you can only take 5 payments -May 15th, 2013, 2014, 2015,2016, & 2017. If you take anything in 2018 before May 16th, you will bust the plan and owe taxes and penalties on ALL previous payments.
If you prorate your first and last years, you can take 8/12 of your annual payment (May – December) in 2013. Then you can take another 4/12 of your annual payment (Jan. – April) in 2018 and then on May 16th, 2018 you can do whatever you want.
This will equal 60 months of payments.
CW2013-04-23 16:10, By: The Red Baron, IP: [166.147.104.39]

L9: Calculating the amount of the annual SEPP distribution.Thank you………….you are correct. The 5th payment would be on May 15th 2017 not 2018 as I had stated. Then why would it matter when I take a payent in 2018 if the SEPP had met the 59.5 or 5 year rule……curious?
It is my understanding that no further contributions can be made to this IRA during the 5 year period. But as I understand the rules, I can make any changes to the portfolio within this IRA ie: change the stock, bond, or mutual fund holdings.
Your help is much appreciated…..
Steve
2013-04-24 17:08, By: sombrerosteve, IP: [68.189.5.77]

L10: Calculating the amount of the annual SEPP distribution.And you can make contributions to a different IRA account that is not included in your SEPP 72-T account calculation(s) if you can afford to despite setting up the SEPP because you needed early distributions. This happens if some voluntarily or involuntarily stops working, and then goes back to work, or he or spouse receives new increases in income.2013-04-24 17:32, By: dlzallestaxes, IP: [98.111.190.136]

L11: Calculating the amount of the annual SEPP distribution.Steve,
Answers to your specific questions:
#1 The SEPP must be the longer of 5 years, or 59.5. Because hers will start 5/15/2013 it won’t expire until 5/15/2018.
It should also be mentioned that your disbursements may occur at anytime throughout the year as long as they are equal.
#2 You may not add to this account, but you may make changes in your positions during the term of the SEPP.
I would also like to expound on what Dlzallestaxes touched on. You may make IRA contributions to another account ONLY if you have earned income.2013-04-24 18:31, By: Scott, IP: [69.109.8.16]

L12: Calculating the amount of the annual SEPP distribution.Thank you all very much………I appreciate the info!!!
Now I understand why the 5/15/2018 day is important even though the date of the last payment will be 5/15/2017.
Gracias
Steve
2013-04-25 16:28, By: sombrerosteve, IP: [68.189.5.77]