How do I get started
L1: How do I get startedWhat do I need to do to invoke this rule to start taking my distributions.
I see you said that you can still contribute to an IRA as long as it is not the SEPP IRA. Does this include Roth IRA’s?
Thank you2009-09-11 20:23, By: lastminutehanna, IP: [22.214.171.124]
L2: How do I get startedYou start by talking to a CPA or Financial Advisor.
Why would you want to start a SEPP 72-T, and tie up your accounts for 5 years, or longer, if you have outside assets that you are talking about putting into an IRA or ROTH IRA, which means that you do not need that money ? Further, you would still owe the taxes on the money you put into a ROTH IRA which would come from these monies that you say you don’t need, but are taking money out of a SEPP IRA, which is usually done to supplement your non-retirement income and needs.
What is your age and date of birth ?
What accounts and amounts do you now have, retirement and non-retirement ?
Why do you want to set up a SEPP IRA ?
If you are going to be 55 or older on 12/31/09, and separated from service during 2009, and have a 401-k, then you probably do not even need a SEPP 72-T, because you could take varying distributions from that 401-k without being subject to the 10% penalty on early distributions.2009-09-12 18:56, By: dlzallestaxes, IP: [126.96.36.199]
L3: How do I get startedI am working free lance grant writing and other business services and am not able to meet my income needs.
I changed employment in 2008, but due to economic circumstances quickly had to become independent.
Although I have applied to may job over the past year I have had only 1 interview..this past month. So I decided to return to school. *I am still looking to work Part Time, as well 3 days a week)
I have returned to college and will be earning my RN is 3 years. Until that time I need to supplement my income.
Since I will be more gainfully employed as an RN after 3 to 3.5 years I want to be sure I can return to putting money away for a “true retirement” where I won’t have to work and will be able to enjoy more.
I have a 403b but it only has less than 10k in it. The bulk of of retirement was rolled into an IRA from a Defined Benefit in late 2008.
I have already used my regular savings to ge me this far.
My DOB: Feb 19, 1955
2009-09-12 19:17, By: lastminutehanna, IP: [188.8.131.52]
L4: How do I get startedI suggest that you do some tax planning for 2009 to start with. If your taxable income is low ( after deductions and exemptions, and you are in the 15% (or lower) tax bracket, you might consider cashing in your 403-b, and paying the tax and 10% penalty. You would still have $ 7,500 after taxes for your current needs.
Determine what your cash needs will be for the next 3+ years ( thru 2012). Your educational tuition will provide TAX CREDITS, which can be as much as $ 2,500 in 2009. ( I’m not sure whatthey will be in 2010, but it should be at least $ 2,000.) These would be under either the new stimulus tax act, or the old Lifetime Learning provisions.These could wipe out all of your taxes, or a considerable amount of them.
A tax professional should help you determine the best timing of payments for the term starting in Jan 2010 ( i.e. pay the tuition in Dec vs Jan, or vice versa).
Also, some of the other exceptions to the 10% penalty might apply. You can take distributions from IRAs to pay for qualified higher education expenses without being subject to the 10% penalty, so the tax credits could offset the taxes on the IRA distributions.
If you had a medical problem, you would visit a doctor. If a legal problem, a lawyer. So, since you have a financial and tax problem, see a TAX PROFESSIONAL.
P.S. If your Defined Benefit plan had “employer stock” which had appreciated significantly in it, you could have used the special tax provision for NUA ( Net Unrealized Appreciation) in 2008, and avoided your current financial situation.2009-09-12 19:35, By: dlzallestaxes, IP: [184.108.40.206]
L5: How do I get startedMy Employer benefit did not have any company stock. It was a private non profit.
Thank you for the information and quick response. I will contact my accountant on Monday.
I have been trying my best to make it through without touching my retirement, but it is coming down to the wire. I am hoping to make it till the end of 2009.
Maybe I will get really lucky and land a jib ebfore that time. Moe than likely I will make the plans to initiate this and then land a job…which is why I was concerned about being able to contribute.
2009-09-12 20:12, By: lastminutehanna, IP: [220.127.116.11]
L6: How do I get startedIF it is determined that you do need to start a SEPP, it will have to last for 5 years, as you are already 54.5. After, or even during your educational period if you begin to earn enough to start replacingyour retirement assets that you are drawing down with the SEPP, youcan contribute to any type of retirement plan including an employer plan, traditional IRA or Roth IRA. But you CANNOT add ANY contributions to the account or accounts that you have identified as your SEPP IRA accounts, or the SEPP will be busted.
Another thing you can do to preserve assets and you need less money from your SEPP, is to consider making the one time switch to the RMD method. That will drop your SEPP distribution by a considerable amount for the remaining year or two you might have to complete the original 5 year SEPP term.
So you DO have considerable flexibility to reduce the drain on your retirement assets even after starting the SEPP.
You should also consider rolling over the 403b to an IRA by direct rollover. Once ina nonSEPPIRA, these funds could also be used to pay for qualified higher education costs without the early withdrawal penalty. The education exception only applies to IRA distributions, not from an employer plan. Again, if you do this rollover, do NOT roll them into any account being used for your SEPP.2009-09-12 21:58, By: Alan S., IP: [18.104.22.168]