L1: Monthly distributionsI am planning to start a SEPP in June of this year, taking monthly distributions. I want to clarify whether it is OK to take the annual payment as 12 equal monthly payments using the 3.45% annual rate for a June starting date. I notice there is a separate interest rate listed for monthly payments on the IRS site that is 3.40%, not 3.45%. Should I just use the 3.40% value in the calculators to be extra cautious, or am I OK with using the higher rate and the monthly payments shown? Does it increase my chance for an audit using the higher interest rate? Thanks in advance for the replies.2010-05-18 12:15, By: Stuw, IP: [188.8.131.52]
L2: Monthly distributions1. Why do you plan to start in June ? There might not be enough time to get all of the paperwork done, so be careful.
2. Do you need 7 months of payments, 3 quarterly payments, or the full annual distribution for 2010 ? What annual amount for future calendar years ?
3. Have you exhausted non-SEPP 72-T possibilities and exceptions ?
4. What is your Date of Birth, IRA and other retirement plan balances, any 401c. ?-K, any NUA (Employer Stock) in your retirement paln, et2010-05-18 22:02, By: dlzallestaxes, IP: [184.108.40.206]
L3: Monthly distributionsWith respect to interest rates, the 3.45% rate applies as the max rate for a June start date. No need to reduce it, and no added audit risk.2010-05-19 00:29, By: Alan S., IP: [220.127.116.11]
L3: Monthly distributionsHere are the answers to the questions:
I’ve been unemployed for nearly a year and my severance has run down to where I will need to supplement our income. We did manage to take 9 months of severance and budget it for 15 months of expenses. The paperwork is ready to send in tomorrow with the plan detailed.
I am fine with 7 months of payments this year, four full years of distributions, and a final stub year with 5 additional payments in 2015.
I rolled over a 401K to a Rollover IRA last year. This is, by far, the largest source of assets available, although I have an additional 100K in other IRAs that will not be part of the 72(t).
I have just over 400K in the Rollover IRA, will be 56 this year, and with the Amortization plan a monthly payout of 1888 per month prior to 15% taxes. No NUA stock was part of the 401K.
The other aspect of this is over 90% of my paper assets, not including house equity, is retirement account based. Should I get re-employed, this will allow me to re-balance my assets into a more even mix of retirement and non-retirement income, so that at the end of the 5 year period I should be able to stop the distributions.
2010-05-19 02:40, By: Stuw, IP: [18.104.22.168]
L4: Monthly distributionsStuw,
You seem to have a good handle on this from the last posting. I would just say that if you get re-employed and it looks secure, you can do the one time change to Minimum Distribution method for the rest of your SEPP. It is usually done at beginning of calendar year, and in many cases, the decrease in your payments is enough that if you were still taking “regular” (Amortization) payments for 5-6 months of the new year, and then decided you shdchange, you may have already taken out more than your new MD annual total, so keep that option and the timing issues in mind for the future. I did it with one of my 2 SEPP plans this year and it has helped reduce myannual payout by more than 50%, because I had a rate of 5.65% in my Amortization calcs for payments that started in March 2007. Keep a copy of your calcs and a copy of the IRA statement that shows the starting balance figure you used in the calcs in case you are ever asked to prove your SEPP plan to the IRS. Good Luck. KEN2010-05-19 03:33, By: Ken, IP: [22.214.171.124]