L1: New seppI will be 53 March 2014 and will do a trustee to trustee IRA roll over from a 401k when I retire April 2014. I plan to start taking SEPP distributions in June 2014. My thoughts areto open two or three separate IRA’s and take SEPP distributions from each using the single life, amortization method with annual distributions not recalculated yearly. My reasoning for taking multiple distributions is to have more control of my future income by being able to change to the minimum distribution method if needed and to mitigate the penalties if a mistake is made on the distribution and a bust occurs. So my questions are; 1. Will I be able to change to the MD method on any one IRA without penalties to the others? 2. If one of the IRA’s are busted will the distributions form the others also be penalized? 3. If the roll overs are complete in April can I use the end of April or end of May account balances to calculate the distributions? I may be over thinking this but I want to make sure I set this up correctly. I would appreciate any input.2014-01-17 14:13, By: criv, IP: [184.108.40.206]
L2: New seppCriv,
Most of what you are thinking of doing makes sense, but, I would makeone small IRAthat is not in the SEPP world or calcs, so itcan be tapped for emergency (with 10% penalty) withdrawals, and then keep the other two new ones as separate unrelated SEPP plans.
AMORT without recalc keeps it simple, if it already generates what you will need for next 5-6 years. If new IRA’s are opened and funded so you can pull a snapshot statement (and print it for your SEPP records on each account so it that backs up your calcs) that will work. I had 2 SEPP plans, with one started in 2006, and the other started in 2007 when I bought a 2nd home and needed more $$ each month. After primary home was sold 2 yrs later, I switched the largest one to Minimum Distribution for last 2 years, and it worked out well. Both are over now. Once you switch to MD, it involves a new calculation using each yr end value in the calculator with your new attained age for the next year to get correct payment that has to be passed on to the IRA trustee as new payment instruction, so don’t forget that wrinkle. In my case, I told the custodian near year end to stop payment for January until I submitted a new payment amount, and that worked perfectly. If you happened to decided to “bust” one SEPP, it will not cause penalties in the other, as long as the individual IRA starting dollar value was the amount used in the calcs, but the 3rd account is a much cleaner way to go, so that does not need to happen unless something major happens.2014-01-17 15:01, By: Ken, IP: [220.127.116.11]
L2: New seppThe only thing that I would add to Ken’s post is to stagger the starting dates to make sure that the IRS doesn’t later come back and define them as one SEPP rather than three.2014-01-17 17:08, By: Gfw, IP: [18.104.22.168]
L3: New seppThank you all for the response. It is invaluable to get information from those that have experience with this process. I do have another question. Judging from your experiences what are the pros and cons ofletting the custodian with hold taxes or doing the quarterly estimates myself?2014-01-18 11:54, By: criv, IP: [22.214.171.124]
L4: New seppI recommend to my clients that they have the custodian withhold and remit the taxes. I’ve never heard of any problems.
I do not trust my clients to not spend the money, and then not have it when it comes time to pay the 4 estimates, or to remember to pay all 4 of the estimates.2014-01-18 14:32, By: dlzallestaxes, IP: [126.96.36.199]
L5: New seppThank you all. This information has helped tremendously. This a great sight.2014-01-18 16:17, By: criv, IP: [188.8.131.52]
L6: New seppI always had the taxes for Fed and State withheld as each qtrly and later monthly payment was made. Both custodians offered me an option of fixed % or flat amount for each, and that worked well, since I chose percentage so it always worked for my payments. The one year I did qtrly estimates, (before starting a SEPP) I found out that they are not done 3 months apart, which almost caught me when I realized that after 4/15 one, another payment was due only 60 days later. I soon figured outthat I was not going to make enough money trying to hold the taxes and pay them a little later on my SEPP plans, so why not eliminate the problem of the calculations, and quarterly filings and payments by the deadlines that are needed each quarter,to both Fed and State, etc.2014-01-19 04:16, By: Ken, IP: [184.108.40.206]