How Can We Help?
< Back
You are here:
Print

Changing methods

Posted
Last Updated On
ByCharlie

L1: Changing methodsI split my clients $2.1M IRA into two in October and used the $1.5M for the SEPP. Now he is considering changing methods.
1. Can I move the split-off IRA back in?
2. What date do I need to use for the new RMD method calc? Dec ”07
I know this is a one time deal and it cannot be undone. Is there anything else I need to consider?2008-04-10 09:36, By: Charlie, IP: [70.154.66.171]

L2: Changing methods

Yes, but you will bust the current plan – 10% penalty on any 2007 distributions or any distributions received in 2008
Probably, just make sure that you haven already distributed more than the new method”s annual distributionallows for 2008.
From your other post, there is no interest rate associated with the minimum distribution method.
2008-04-10 10:52, By: Gfw, IP: [98.214.67.158]

L2: Changing methodsA little confused:
If we combine the IRAs and bust the plan he will pay the 10% on what has already been distributed. You mentioned that anything taken in ”08 is also penalized. Does this mean we can hold off on ”08 distributions and start a new SEPP in ”09?2008-04-10 11:10, By: Charlie, IP: [70.154.66.171]

L2: Changing methodsSimply stated, once the plan is in effect there can be no additions to the plan – since you divided the IRA before the start of the SEPP, they can”t be combined without busting the plan until after the SEPP terminates.
If you bust the current plan there is a 10% penalty on any distributions taken since the inception of the SEPP. Once the SEPP is busted, a new SEPP can be implemented.
2008-04-10 11:21, By: Gfw, IP: [98.214.67.158]

L2: Changing methodsCharlie,
If he wants to take less out (assumption from his desire to change to RMD method) why does he want to add the other IRA into the mix? Is it that he wouldbe getting too little with change to RMD on original SEPP? If so, why not change the original one to RMD (no penalty involved if he has NOT already taken out more in 2008 than the annual total from recomputing the RMD method–using 12/31/2007 balance for the calcs), and then make a new SEPP with the other one, which could also be RMD, or could be one of the other two methods with any interest rate less than or equal to the max allowable.Then the penalty is avoided. Just a thought. If we had his DOB, the method used, and rate used, plus the original annual withdrawal amount,and start date, andalso his desired new annual withdrawal, we might be able to play with the figures and make other suggestions.
One thing to be cautious about is that after less than 6 months?he already wants to change his plan. If both IRA”s are now tied up in the new plan under RMD, there is no more wiggle room (or other IRA funds available for emergency withdrawals) until the SEPP is completed.KEN2008-04-10 15:08, By: Ken, IP: [68.160.37.37]

L2: Changing methodsHe was concerned about the market and realized that he didn”t need the $110K he had originally planned for. After further thought we decided to continue with the current withdrawals and invest the excess not spent into an investment account. This makes things much simpler. Once again, I appreciate all of your advice. 2008-04-11 06:23, By: Charlie, IP: [70.154.66.171]

Table of Contents