New SEPP Calculation Amt. Financial Advisor vs. Calculator
L1: New SEPP Calculation Amt. Financial Advisor vs. CalculatorHI we just started investigating taking my IRA distribution early and ran some numbers here, and called a Financial advisor who I don’t know or work with and got different results. Here’s the info:
DOB: 11/18/1960 Beneficiary DOB:4/30/1954
IRA Amt: 254,000
Date of Dist Start would be ASAP
The advisor said I could get $11,508 / yr.
The calcs said $8929 Amortized, $8784 Annuitized.
Where is the difference coming from?
Thanks!2015-06-08 17:25, By: donnandon, IP: [184.108.40.206]
L2: New SEPP Calculation Amt. Financial Advisor vs. CalculatorFirst, don’t use the joint calculations.
Single life always produces a higher number. Based on Age 55, $254,000, an interest are of 2.04% and a start date of 6/18/12015… I get an amortization distribution of $11,515.70
Since I don’t know what assumptions your “financial advisor” used, I can’t comment on any difference.
SEPP Plan Assumptions
Total IRA Accounts
SEPP Plan Account
SEPP Interest Rate
Investment Interest Rate
1st Distribution Date
Date Age 59.5
5 Year Date
1st Modification Date
Minimum Distribution Method
Initial SEPP Payment
Assuming the 5-Year rule, when can SEPP payments be modified?The five year period begins with the date of the first distribution [6/18/2015] and ends on the last day of the fifth year [6/18/2020]. During this five year period, the total SEPP withdrawals should be equal to five (5) times the Planned Annual Distribution. The dates covering the 5-Year period…
Year: 06/18/2015 – 12/31/2015Year: 01/01/2016 – 12/31/2016Year: 01/01/2017 – 12/31/2017Year: 01/01/2018 – 12/31/2018Year: 01/01/2019 – 12/31/2019Year: 01/01/2020 – 06/18/2020
2015-06-08 19:46, By: Gfw, IP: [220.127.116.11]
L3: New SEPP Calculation Amt. Financial Advisor vs. CalculatorThanks! Your number is what the advisor had within a few dollars. Not sure what I did wrong with the calcilator. Do I need to use the exact number per year or can I use s lower number to avoid irs issues? Also, how could I do it to get monthly payments? Thanks!
P.s. could I take the full year distributio now and the go to monthly oayments next year at this time?2015-06-08 21:43, By: donnandon, IP: [18.104.22.168]
L4: New SEPP Calculation Amt. Financial Advisor vs. CalculatorYou should use the exact annual amount or if you choose to take monthly payments, divide the annual amount by 12. Taking out less is just as likely to bust the plan as taking out more, so use the exact amount.
You can change the distribution pattern anytime during the year or from year to year. Just be sure that the annual amount is correct when making these changes. For 2015, you have the option to take out the full annual distribution or pro rate by the month starting with the month of the first distribution. So yes, you can take a full annual distribution now and then switch to monthly distributions in 2016. When doing so set up the monthly distribution no later than mid month so you have time to correct any errors in December.
2015-06-09 03:08, By: Alan S, IP: [22.214.171.124]
L5: New SEPP Calculation Amt. Financial Advisor vs. CalculatorHe can take out a lesser amt. as long as he takes the same amt. every year. He would just be using an interest rate lower than the 120% maximum?
2015-06-27 12:21, By: dumbfarmer, IP: [126.96.36.199]
L6: New SEPP Calculation Amt. Financial Advisor vs. CalculatorNo, bad advice. He can not just take out less than the calculated amount. You need to be able to justify the amount of the distribution. What interest rate would he use?
Anyone with a SEPP should keep a copy of the calculations with the assumptions used as it would be the first thing the IRS will ask to see if audited or questioned. 2015-06-27 12:33, By: Gfw, IP: [188.8.131.52]
L7: New SEPP Calculation Amt. Financial Advisor vs. CalculatorNow I am confused. I thought you could use any interest rate up to 120%. As an example:
A 54 year old person has 500,000 as acct. balance and 120% rate is 2.10%. Withdrawal at 2.10% is $22,366 but they want to withdrawal an even $22,000 each year. Can’t they use a interest rate of 1.9812% to get to the 22k number.2015-07-05 16:06, By: dumbfarmer, IP: [184.108.40.206]
L8: New SEPP Calculation Amt. Financial Advisor vs. CalculatorYou can, but you must know exactly what rate that you will be using.
You specify the rate and do the calculations – at that point you are locked in – you can’t just say I used a rate below the 120% published rate.
Just stating any rate isn’t correct and is really bad advice – you better be able to have the exact rate that produced the calculation amounts if you ever get audited.
As a general rule, rather than using a lower interest rate, always use the maximum rate for the calculations.
If it produces an amount higher than desired, use the reverse calculator, enter the desired amount and move the balance to a separate IRA for emergencies or maybe even another SEPP at a later date.
A lot more flexibility and no trying to guess at a 5 or 6 decimal point interest rate. 2015-07-05 17:19, By: Gfw, IP: [220.127.116.11]