Distribution Date vs. Dec 31/Jan 1 Calendar dates
L1: Distribution Date vs. Dec 31/Jan 1 Calendar datesI see the mid-term rate is moving up in July to an estimate 3.03% from a 2.71% in June. I retired on April 30, 2009 at age 55. I rolled over my 401K into my individual IRA in May. I would want thehighest mid-term rate to provide me with the most dollars possible for each yearly distribution (allocated monthly). Can I begin my distributionson August 15, 09 for year one using my IRA balance on that date, or do I have to go back to Dec 31/Jan 1 2009 balances of my former 401K and my IRA balance at that time? My IRA balance is considerably higher now than the 401K and IRA were at the end of Dec 31/Jan 1 09. I willsee larger monthly payments if I can begin in August (assuming your predictions are accurate)? I am planning on using the annuitization method.
Thank you for your response.2009-06-03 23:01, By: Doug, IP: [22.214.171.124]
L2: Distribution Date vs. Dec 31/Jan 1 Calendar datesDoug,
You should not use the 12/31 balance for several reasons. Use a balance for your IRA after your rollover, eg the 6/30/09 balance, although you can use the balance for any day prior to your starting date and after the IRA rollover was complete. Be sure that all your funds including trailing dividends are out of the 401k plan and in your IRA before selecting the day of your initial account balance.
Since gfw is highly proficient in forecasting the next interest rate, you might wish to hold off a month or two since the trend is higher and will produce a larger SEPP distribution per dollar of account balance. You also have the flexibility in your first year of taking out either the pro rated amount or the full annual amount. In other words, if your annual amount is 24,000, and your first distribution is August, you can take out either 10,000 or 24,000 in 2009, but nothing in between.
You might have avoided a SEPP altogether since you qualify for the age 55 penalty exception for distributions taken directly from your 401k plan. This was lost when the IRA rollover was done, but perhaps your plan did not allow for flexible or periodic distributions, and if that were the case then you are better off with the SEPP, despite the rigid requirements. Anyway, that is water over the dam at this point, since the IRA rollover is done.2009-06-04 00:56, By: Alan S., IP: [126.96.36.199]