L1: Need helpI just finalized my divorce. I have been unemployed for 19 months and need annual money to survive until I can get employment again. I will turn 55 in a few days. I have a traditional IRA in the amount of $70K and a rollover IRA for $250K with Vanguard. Do I need to set up separate accounts for both the traditional IRA and the rollover IRA of which I would draw the money from(only for 72t). I want to draw over the next 5 years on an amount of $300K and leave $20K for emergencies if needed. Can I use the 2.62% interest rate in the calculator and would print out results for IRS purposes if needed in the future? I think I read on this site that you can use back interest rates from 2 months ago. Can I take a full one year amount at this time in 2010? I think I read in other discussions I can? I just want to make sure I have everything covered. I take it Vanguard is familiar with the 72t and telling them whatI want as to an annual amount when I call to notify them of what I am doing. I read about the form 5329 I will need to file for taxes and instructions for the 5329 as I understandVanguard does not use the rightcode and that looks self explanatory. Thanks for your help.2010-10-31 21:38, By: KCM, IP: [184.108.40.206]
L2: Need helpSEPP assets need to be in one account and any non-SEPP assets need to be in another account. The maximum interest rate is determined by the date of the first distribution. If the 1st distribution occurs in November, then you could use the higher of the rate for September or October. The September rate is higher at 2.33%, so that is the maximum rate that you could use. Yes, you can take the full annual distribution even if you start the SEPP in November. In 2011, you can determine how you want to receive distributions as long as you take the full annual distribution by 12/31 – no more and no less.2010-10-31 21:57, By: Gfw, IP: [220.127.116.11]
L3: Need helpYou should first do a complete analysis to determine the annual amount you will need from your IRA for the next 5 years, and taking the full annual distribution in 2010 will give you a head start. You might be able to save some of that for emergency needsin addition tothe insurance you will get from the non SEPP IRA account. If it looks like you can make it with 300k SEPP IRA and a 20k non SEPP account, then all you need to do is transfer 50k from the smaller IRA into the larger one. Do this by direct transfer, not by indirect rollover.
Perhaps taking that full annual amount this year will allow you to keep the non SEPP IRA smaller than it otherwise would need to be, and it also results in your being able to withdraw more total money before your Nov, 2015 modification date.
You are correct about the 5329. You will need to file it, but that is very simple to do.
2010-11-01 00:03, By: Alan S., IP: [18.104.22.168]
L4: Need helpIt is not that Vanguard “does not use the right code”, they use a code “1” because they will not take your responsibility that you have no other SEPP IRA accomunts, that you have no non-deductible IRA contributions anywhere, and they do not have proof of your date of birth, etc.
Rather than requiring an extensive amount of documentation, they just leave that responsibility with you by using code “1” rather than code “2”. As Alan said, filing a form 5329 is not any problem with most tax software.2010-11-01 01:07, By: dlzallestaxes, IP: [22.214.171.124]
L2: Need helpHi Gfw,
When I go to the SEPP calculator, the interest rate for October is 2.62%, is that not correct? Just confirming as you said to use 2.33% for September. Can I not use the October rate, not that it will make a huge difference in the annual payments?
Thank you all very much for all the information and the quick response. This site is great and the responses are very informative indeed.2010-11-01 01:50, By: KCM, IP: [126.96.36.199]
L3: Need helpThe 2.62 rate is for August, but you cannot use that rate beyond October and October is over. Therefore, you would use the Sept rate of 2.33 assuming you put everything together and the first payment is distributed by the end of November.
Since rates have continued to fall, you should try to get things nailed down and the distribution check ordered in time to have it distributed prior to the long Thanksgiving weekend because a Dec start date will have to use an even lower rate.2010-11-01 02:58, By: Alan S., IP: [188.8.131.52]
L3: Need helpAs Alan pointed out, the last day to use the August interest rate would have been October 31.
The calculators on this site automatically use the maximum rate as of the day the calculations are performed on the assumption that the date of the 1st withdrawal occurs on the date of the calculations.
As of today, November 1, the rate that appears in the calculator has now changed to 2.33%. On December 1, it will change to the then maximum rate.2010-11-01 09:05, By: Gfw, IP: [184.108.40.206]