L1: IRA ContributionsI am planning a career change in the next couple of years and intend to start taking SEPPs from my IRA. I understand that once I start taking the SEPPs, I can no longer contribute the IRA that the SEPPs are coming from.
My question is: Can I make contributions to a second IRA while taking SEPPs from a first IRA?
Thanks.2014-07-28 14:31, By: hdwaynes, IP: [188.8.131.52]
L2: IRA ContributionsYES, YOU CAN. BUT —-
Please give us you figures — IRA Balance, DOB, etc.
I would suggest that you consider not making future IRA contributions, set aside only part of your IRA into a SEPP 72-T if you need to supplement the $ 6,500 that you would not be contributing. Why offset the $ 6,500 deduction with $ 6,500 of income ? It doesn’t make sense to me. Set up one IRA for future emergencies so you do not bust your SEPP if you set one up.
If you have a 401-K, and you will be 55 or older when you leave your company, then you should find out if you can get partial distributions from your 401-K whenever you need money.
Also, see if your 401-K has company stock. If so, then ask them for the cost basis, and research the “NUA” (Net Unrealized Appreciation) provision of the tax code, which wil save you significant tax cost, and give you 100% flexibility.2014-07-28 15:14, By: dlzallestaxes, IP: [184.108.40.206]
L3: IRA ContributionsThanks for the response. My question was more of a curiosity question rather than a plan. Trying to understand all of the rules. But since you asked…
I’m currently 50 years old and a Federal employee. Present value of my 401k is 780,000 (I don’t actually have an IRA, just the 401k). I contribute the Federal maximum, including “Catch-up” contributions. I’m thinking of staying 1-2 more years, which means up to 45K in new conributions plus whatever interest I earn.
The new job wouldn’t pay very well or necessarily be stable employment. But it is something that I really want to do. I don’t want to rely on the new job, which is the reason for augmenting my pension with the SEPP payments. As daunting as this is, every time I run the math it seems to work.
Thanks again for the response..sure glad I found this site.2014-07-28 18:43, By: hdwaynes, IP: [220.127.116.11]
L4: IRA ContributionsI would advise you to consider staying until the January of the year when you will become 55. ( You didn’t give me your DOB as I asked.) Then, if they would allow partial distributions, you would have great flexibility, and not need a SEPP 72-T which would tie you up until you were 59 1/2.
If you could do that, you would save about $ 22,000 in taxes on the $ 90,000 contributions to your 401-K over the next 4 years. You will possibly be in a lower tax bracket when you start your new job.
How much do you plan to need to supplement your pay from your new career each year ? Calculate what the SEPP will provide at various levels, say $ 500,000 $ 800,000 and $ 900,000 , and consider the alternative plans — including setting aside $ 200,000 into a separate IRA not in a SEPP to start with.
You might consider investing in a financial planner to help you in the planning process, one that understands SEPP 72-T plans.
2014-07-28 19:43, By: dlzallestaxes, IP: [18.104.22.168]