Monthly Distribution Calculation
L1: Monthly Distribution CalculationAny input is appreciated and please correct me if I am wrong:
To figure out my monthly SEPP payment would basically be just dividing my annual amount by 12, correct? I just want to confirm there is no other type of calculation I need to do.
Also, after calculating my monthly payment, I am able to takemonthly payments even though 2010 will only be payments from August through December (5 months) and NOT equal the full annual amount, correct? I would thenmake up the remaining 7 months of payments during the months of 2015 as a stub/short year.
Thanks for the help!2010-08-25 20:12, By: h, IP: [22.214.171.124]
L2: Monthly Distribution CalculationYou are basically correct.
HOWEVER, if you want to, you cantake the full 12 months annual distribution in 2010, regardless what month you start in, even if it’s December. The amount you take in the first year, 2010 for example, is either of those 2 figures, and you have to decide what you NEED from a cash flow standpoint, and what your tax situation will be for 2010.2010-08-25 20:19, By: dlzallestaxes, IP: [126.96.36.199]
L3: Monthly Distribution CalculationH,
I will add to DLZ’s last post. In 2015, you will also need to have passed age 59 1/2 in order for your SEPP to stop after taking those 60 monthly payments you mention. One more thing: Have you been assured 100% by your custodian that they can issue first payment before the end of August? That is only 4 business days from now. If not, you will miss the chance to use that higher rate, and may have to adjust future 2010 payments so the total in 2010 is only4/12th’s of the newannual amount (vs. 5/12ths of annual amount you hope to use) computed using the lower interest rate you are trying to avoid, if check is issued on Sept 1st, for example. KEN2010-08-26 03:55, By: Ken, IP: [188.8.131.52]
L4: Monthly Distribution CalculationGood points from Ken.
The month the plan begins is determined by the distribution date, not the received date. So if you are trying to start late in a month, you need to know what date the custodian will show as the distribution date.
In certain cases, you might even want to tell the custodian that you need the check distributed by 8/31, and if they were unable to meet that date, to abort the request. If the interest rate is critical enough, that would giveyou time to rethink your options rather than being stuck with an insufficient annual distribution. Of course, you could also just roll the distribution back into the account if you had a rollover available and the plan would not be initiated.
2010-08-26 16:56, By: Alan S., IP: [184.108.40.206]
L5: Monthly Distribution CalculationBut in this imperfect world, it would be just your luck for the company to issue a 1099-R, showing distributions and contributions ( of the rollback). Then lots of luck straightening thatout.2010-08-26 19:08, By: dlzallestaxes, IP: [220.127.116.11]
L6: Monthly Distribution CalculationYes, they MUST issue a 1099R. You would simply report the rollover on line 15 of Form 1040 like any other IRA rollover.
If you later started your 72t plan, their handling would depend on their distribution coding. If like most custodians they no longer provide the exception code, they would lump this earlier rollover with the later 72t plan distributions and code it all 1 (early). You would report the rollover as stated above and it would leave the remaining unrolled distribution amount to match the 72t requirement. Of course, a 5329 would then claim the exception on the 72t amount.
This is the same reporting that would ensue if you took out too much and rolled the excess back into the plan within 60 days. As stated earlier, the pitfall here is that this rollover uses up the one rollover permitted in 12 months, so you then have lost that particular safety valve for the next 12 months.
2010-08-26 21:48, By: Alan S., IP: [18.104.22.168]