Final year of SEPP

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L1: Final year of SEPPI will turn 59 1/2 around June 2011 and trying to plan my distributions for 2011.I have used annual recalculation every year effective Jan 1(balance as of Dec 31, updated age and interest rates) and calculated the annual amount. My monthly payment is processed on the 5th of each month, so, after I have calculated my annual payment, I have adjusted the payments for Feb – Dec to account for the Jan payment being different. The annual amount, of course, agrees with my recalculation and amount reported on the 1099-RBut, since I will turn 59 1/2 during mid-year, will my previous calculation be acceptable? Since I will not HAVE to take distributions after around June, my annual amount will be slightly different.Also, after I turn 59 1/2, the custodian will change the distribution code to ” 7 “.Any thoughts on what the best plan would be. I just want to start my planning early.Many thanks.2010-06-05 15:53, By: blazer, IP: []
L2: Final year of SEPPWhile you did so specify, your question appears to assume that you will have taken at least 60 months of distributions by the end of 2010, and therefore your plan modification date will be the attainment of age 59.5.If so, the final stub year options are the same for recalc plans as for non recalc plans. Accordingly, you will have the advantage to select one of the following options, whichever fits your financial needs best:1) Take NO distributions in 2011 prior to your modification date. This will save you the risks inherent in doing a 2011 recalc.2) Do the recalc based on 12/31/2010 value as you have been doing in the past and distribute your full annual recalculated amount prior to your modification date.3) Do the recalc as above and pro rate your 2011 distribution based on the number of full months prior to the month you will reach 59.5. Since you reach 59.5 in (or about?) June, 2011, you would take out 5/12 of your recalculated annual amount.In short, your need for current funds vrs preserving your IRA for later in retirement would be the key factor in selecting from the above 3 options.Your 2010 recalculation cannot be used for 2011. The closest you get to that is Option 1 under which you are spared from doing a 2011 recalc by taking no distributions prior to your modification date.Note that custodians do not handle 1099R forms uniformly. You are correct that technically you should get a 1099R with a Code 7 for any distributions you take in 2011 after age 59.5. For distribution taken prior to 59.5, you should get a code 2, but your custodian may not be providing a code 2 and then you will need a 5329 to change the coding. If you take no distributions prior to 59.5 in 2011, it will eliminate the need for a pre 59.5 1099R form.Remember, the above comments assume you will have met the 5 year requirement by the end of 2010. If not, please advise with the date of your first 72t distribution.2010-06-05 20:13, By: Alan S., IP: []

L3: Final year of SEPPAlan:Thanks for the info/response. I started my SEPP on May 2, 2005 and took a full annual distribution in 2005 and every year since. So, at the end of this year I will have taken 6 annual distributions.I will turn 59 1/2 on 6/12/2011. I guess I never thought about not taking a distribution in the year I turn 59 1/2. So that would be an option. I may do the recalculation on 1-1-2011 and distribute half through June and then stop. Or, just stop at the end of this year and not take any until after 6-12-2011.Thanks for the info.2010-06-08 18:35, By: blazer, IP: []