IRA prep for SEPP

L1: IRA prep for SEPP
I’m looking for some advice. I have a rollover IRA that has a significant amount (7+ figures) in it. I would like to take advantage of the IRA to supplement my income money utilizing the 72t withdrawal. I’m 51 (52 in Nov) and looking to retire at 58. I would like to split the current rollover IRA into two IRAs of equal amounts then start a 72t distribution from one of them now and then use the other at a later date. I would like to start my distribution in Nov. Is this a doable and legal? Or should I leave it as one? Any advice is greatly appreciated.
2018-07-24 15:34, By: Bobi, IP: [146.142.1.10]

L2: IRA prep for SEPP
If you need penalty free income of a certain amount and have an IRA balance that would generate more than you need, you should do a direct transfer of the amount you need for the 72t plan to a second IRA, and use that one for the 72t distributions. The other IRA can be left for retirement, emergency needs or other later use. This is entirely legal and much more effective than starting a 72t plan from an IRA balance that is too large.
That said, your situation is rare since you are still working and plan to retire at 58. While there are several possible scenarios for needing the funds now, in most cases knowing that you may spend 30 or more years in retirement and only plan to work 6 more, they would be loading up their retirement plans as much as possible, not taking distributions prior to retirement. In addition to reducing your retirement savings you could be spiking your marginal tax rate since your taxable income will include both your earnings and the 72t distributions.
2018-07-24 15:59, By: Alan S, IP: [24.117.172.15]

L3: IRA prep for SEPP
I suggest that you look at your full financial and tax picture. You could have up to $ 24,500 in additional current cash flow if you did not make contributions to a 401-K, but then you would lose that amount as a tax deduction.
If you have non-retirement investments in taxable fixed interest securities, you might consider tax-exempt municipals, or increasing Qualified Dividends which are taxed at a maximum of 15%-20%, rather than ordinary income rates of 22% -35% or more, possibly investing in MLP/PTP preferred stocks yielding 5%+ taxed as Qualified Dividends.
If you have a non-retirement account, you might consider using those investments to supplement your cash flow by selling them as needed, which will be taxed only on the gains, and only at 15%-20%, rather than the SEPP distributions being taxed on 100% of the distributions, and at the higher regular tax rates of 12%-35%.
All of these options should be considered before setting up a SEPP.
2018-07-24 16:23, By: dlzallestaxes, IP: [173.75.247.117]

L2: IRA prep for SEPP
Absolutely doable from what I’ve learned if you need it. I would hold it as long as you can however but it sounds like you might need the supplement until 58. I’m doing the same thing only I’m going to make a run at retiring for good. Otherwise I would have hung in there an not touched the money but my income was(is) sufficient while working.
2018-07-24 16:43, By: MCNE, IP: [216.163.255.3]