Final Calculations

L1: Final Calculations
Plan details:
Open IRA for SEPP – $480k
Date of Birth – 3/6/1965
Date of 1st Distribution – 1/15/2019
Using Amortization Method and Single Life Expectancy
Interest Rate = 3.3% (reduced from max to get to desired annual distribution)
Annual Distribution = $25,202.23 (was shooting for $25k but calculators only allow 2 decimal points so I was stuck with an offset, I did use excels goal seek and got the exact at 3.29931299491293% but that seems silly?).
Questions:
1. I’m assuming when I set up my IRA (brokerage account), I can include multiple investment options (stocks, bonds, securities, etc.) so that when I sell I can sell based on market results at that time. Correct?
2. I’m assuming it is ok to “rebalance” my portfolio within the SEPP IRA as long as I’m not adding to or removing from the account (other than through the distributions). Correct?
3. I would like to withdraw on a monthly basis (vice annually). Most guidance I can find says this is ok as long as the annual distribution is exact. Some of the wording seems unclear though. For instance, the IRS states ” Your monthly payment under the required minimum distribution method would be the calculated annual amount divided by 12. Under the amortization and annuity methods, the choice of a having the payment made monthly should be part of the original calculation.” I’m not sure what that means. None of the calculators provide an input for whether I want to withdraw on a monthly or annual basis. Can I withdraw on a monthly basis when using the Amortization Method?
irs government site – retirement-plans-faqs-regarding-substantially-equal-periodic-payments#11
4. I would love to have an expert review my plan but am having a hard time finding the right person. Everyone I’ve contacted to date want to manage all of my funds in order to provide support (I’ve only spoken with financial planners). I would rather pay a fee (flat or hourly) to have an expert review my plan and provide feedback. Who should I be contacting (what type of advisor)?
5. Distribution Factor – How are these calculated for Amortization/Annuity Method? Are they even used? I’m using the PMT calculation in excel (and using the single life expectancy number (30.5) for the “nper” value in the formula). Are they only used if we chose the Uniform or Survivor life expectancy tables?
I’ve read the Planning Pointers and completed the recommended “evidence” paperwork (SEPP Form). Is there anything I’m missing?
Thanks for your feedback.
2018-12-04 18:30, By: SKRAM, IP: [75.106.226.77]

L2: Final Calculations
1. CORRECT
2. CORRECT
3. CORRECT. You can use any frequency and any amounts so long as the total equals the calculated ANNUAL AMOUNT. Take whatever you want when you want it, for example money for real estate taxes due, and then adjust Nov/Dec payments accordingly.
4. I always recommend tax practitioners, like CPA’s or EA’s (Enrolled Agents) who do individual taxes. Just ask them if they are experienced with “SEPP 72-T” plans. DO NOT USE THE TERM “SEP IRA’s” (with one “P”).
5. I’ll leave that to Alan to respond.
2018-12-04 23:15, By: dlzallestaxes, IP: [173.59.46.223]

L3: Final Calculations
The distribution factor in the SEPP calculator is simply the RMD divisor when using the RMD method. But it is never recommended to use this method unless you make the one time change to the RMD method allowed when you no longer need the higher distribution from one of the two fixed dollar methods.
The amortization method produces a slightly higher distribution than the annuity method. The SEPP calculator on this site will show the distribution factor (divisor) for these two fixed dollar methods. It is generated by marrying the age, interest rate (max 120% mid term rate shown for the applicable month on this site), and the chosen RMD divisor. The default shown in the calculator is the single life table because it produces the highest distribution of the 3 table options.
The overall strategy we recommend is to use the highest interest rate of the prior two months along with the single life table. The third variable you enter is the account balance and there is flexibility in determining the account balance to use, but it must be reasonable with respect to the current balance on the date of the first SEPP distribution. Typically, the highest account balance possible is entered. Along with that balance, the single life table, highest interest rate and age, the calculator produces the distribution factor, divides the account balance by that factor and produces the dollar amount of the SEPP distribution.
Now suppose that distribution is more than you need after considering inflation of your expenses during the SEPP term. You would then use the reverse calculator to determine WHAT ACCOUNT BALANCE will generate the distribution you want. You would then do a direct trustee transfer to a new IRA of this balance and your SEPP plan would come from the new IRA. The balance in the former IRA could be used for emergency needs to prevent busting your SEPP, or it could be used to start a second SEPP plan later on.
I guess you could experiment with your spread sheet to see if you can duplicate the results of the SEPP calculator here. I have never done that, but there is no question that the calculator here is accurate. gfw, the site owner has been doing these for many years. He may have something to add to these comments.
2018-12-05 03:39, By: Alan S, IP: [72.24.226.251]

L3: Final Calculations
Thank you so much for your thorough response. A follow-on Question.
Question: In the last year (2024), must the total distribution ($25,102.06) be taken prior to the 1st Modification date (9/5/2024) or can it be taken anytime prior to 12/31/2024 (planning 12/15/2024, not waiting until last day)?
Details:
Open IRA for SEPP – $455k
Date of Birth – 3/6/1965
Date of 1st Distribution – 1/15/2019
Using Amortization Method and Single Life Expectancy
Interest Rate = 3.69% (Dec 2018)
Annual Distribution = $25,102.06
1st Modification Date – 9/5/2024
Distribution Plan (for years 2019 through 2024):
1/15/2019 (Month 1) – $3102.06
Months 2-12 – $2000
2019-01-02 20:45, By: SKRAM, IP: [75.106.212.145]

L4: Final Calculations
There are 3 requirements that you must be concerned about satisfying:
1. You must take a total of 60 months/5 years worth of distributions.
2. The plan CAN END 60 months from the date of the first distribution. Since yours will be 1/5/2019, 60 months would be 1/5/2024 for the 60 months.
3. HOWEVER, your plan CANNOT END until you reach 59 1/2, if it is after the 5 years, which is your situation. DOB 3/6/1965 plus 59 1/2 years = 9/6/2024.
4. So, it depends if you are taking annual distributions or monthly distributions. You indicated that you will be taking $ 3,102.06 on 1/5/2019, and then $ 2,000 per month the rest of 2019. You can continue that pattern for future years, or take an annual distribution every January, or some other pattern. Regardless, by 12/31/2023, you would have satisfied all but the 9/5/2024 end of your plan (see # 3 above). Therefore, in 2024, you can take -0-, $ 18,826.55 ( $ 25,102.06 x 9/12), or $ 25,102.06 thru 9/5/2024. In addition, you can then take any amount, or no amount, after 9/6/2024.
2019-01-02 21:08, By: dlzallestaxes, IP: [173.59.46.223]

L5: Final Calculations
Ok, I think I understand but let me restate to make sure I understand.
2019 through 2023 = distribution of $25,102.06 (any distribution frequency, ie annual/monthly/whatever)
2024 = 3 options
1. take $0
2. take $18,826.55 prior to 9/5/2024 (stub year calculation correct?)
3. take $25,102.06 prior to 9/5/2024
Thanks again!
2019-01-02 22:22, By: SKRAM, IP: [75.106.212.145]

L6: Final Calculations
Yes, you understand your options correctly. You can wait to make your choice when 2024 comes around. If you do not need the money, it is better off to wait until after the plan ends because if it is ever determined for any reason that your plan was busted or was never valid, you will owe the retroactive penalty and interest. By not taking a distribution prior to 59.5 in 2024 you are insuring that you can never be penalized on 2024 distributions. And you also will not have to file a 5329 for 2024.
2019-01-03 00:00, By: Alan S, IP: [72.24.226.251]

L7: Final Calculations
Thanks again for all your assistance. I think this final part was a bit confusing to me because the output of the calculations from this site list 6 years of distributions so I thought I would be required to take the full 6 years. Would hate to bust the plan by not taking any distribution the last year! Thanks again.

Year-By-Year Analysis of SEPP Values

IRA Value Allocated to SEPP Plan:
$455,000.00

Yr
Atn
Annual

Age
Payment

1
54
$ 25,102.00

2
55
$ 25,102.00

3
56
$ 25,102.00

4
57
$ 25,102.00

5
58
$ 25,102.00

6
59
$ 25,102.00

2019-01-03 01:19, By: SKRAM, IP: [75.106.212.145]