New SEPP Plan for January

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L1: New SEPP Plan for January
Hi, thank you for this great site. We’ve been learning a lot about how to set up a 72t and we are ready to take the plunge on a NEW SEPP plan. Please let us know if we missed anything. My questions are below:
Age: June 1967 (age 51 current)
IRA Amount as of Dec 31, 2018: $399,183.88 (this is the full balance of one IRA we plan to use, I have a second IRA in another Brokerage we are hoping not to touch until 59-1/2 or later).
Amortization rate 3.65% from Nov. 2018 Fed Midterm rate
1st Payment date 1/15/19 (we are thinking of taking one annual payment in January to transfer to a high yield savings to draw from monthly)
Annual payment: $21,243.45 gross
These numbers are according to this site’s calculator.
My questions:
1.If you know where we can find any other sites to double check the calculations, I would appreciate it.
2.Also, I may have read it and forgot, but how is the “distribution factor” of 18.791 for the amortization applied to the balance? If I divide 399,183.88/18.791 it equals $21,243.35 (Not the $21,243.45 that the online calculator came up with). If I read the site well enough, it has to be exact? (I know a dime shouldn’t matter but I would hate to have a meeting with the IRS on this).
3. And how does one get the number for a distribution factor?
Thank you again for your guidance.
2019-01-01 04:23, By: retired nomad, IP: []

L2: New SEPP Plan for January
1) You could check with the calculator. I entered your data and arrived at the same distribution, although they round to the nearest dollar. This shows that you used the correct age of 52 (age at end of 2019). Note that your calculation would be slightly higher if you used the higher December rate of 3.69%. If you google other calculators, I would ignore the ones that ask you about your distribution dates or patterns because they can produce slightly different figures based on the different average IRA balance. These variations are unnecessary and confusing, and the IRS does not require recognition of your distribution pattern, which can change every year if you want to.
2) A small difference such as a dime in this case comes from rounding conventions. For example if the (distribution factor) divisor was 18.79 instead of carrying out another decimal place that difference would disappear. The bankrate calculator rounds to the nearest dollar so could have a discrepancy of up to .50. Do not be concerned with small rounding differences between the calculators. In fact, if you distribute one annual amount, you avoid the potential difference of another additional rounding to determine a monthly payment.
3) The calculator melds the interest rate, your age, and the single vs joint table factors to generate the distribution factor which will work with any selected account balance. But there is also a reverse calculator on this site if you want to determine the balance needed to generate a specific distribution amount.
4) We always recommend being as exact as reasonably possible, but in recent years the IRS has not been “nit picking” minor differences such as these rounding conventions. They are mainly looking at your 1099R being the same each year throughout the plan (unless you made the one time switch to the RMD method). Another key is that your 1099R will probably be coded 1, so you will have to file a 5329 annually with your tax return to claim the penalty exception code 02. If something looks abnormal to the IRS they might ask for your calculation documentation, but even that is rare. Actually, very few people at the IRS understand these plans.
2019-01-01 18:46, By: Alan S, IP: []

L3: New SEPP Plan for January
Thank you Alan for the information and double checking. I have also double checked on Bankrate and obtained the same results.
We are using this amount for basic expenses and have other accounts for discretionary spending. I will be contacting Fidelity before we draw from the account to see how they will code it for IRS purposes. Either way, I’m sure that we can file form 5329 if needed.
Again, many thanks!
2019-01-02 18:24, By: Retired Nomad, IP: []

L2: New SEPP Plan for January
I don’t know of any other websites that are DEVOTED solely to SEPP 72-T plans. There may be someONE at Vanguard, Fidelity, or at a broker who may answer a question, but I doubt if they have the years of experience and expertise of the respondents on this site.
It is interesting to me how often people are concerned about the EXACT figures for the annual distribution, and then divide by 12, and then have an issue over pennies difference. It would seem to me to be more important to consider the amount needed, and to use the reverse calculator on this website, which probably does not exist on any other site, or at any financial institution. Most taxpayers should be setting aside some money in a separate IRA account to be used in case of an emergency, and so they can avoid busting their SEPP 72-T plan. In addition, people should consider using a little less than the MAXIMUM INTEREST RATE, which would probably result in a $ 100 or less a year in distribution, but might give them a comfort level amount that is exactly divisible by 12 if they want to take monthly distributions.
2019-01-01 19:45, By: dlzallestaxes, IP: []

L3: New SEPP Plan for January
Like you, I haven’t found any other site that covers this are in so much detail. I’m just grateful I found it from the Bogelhead’s site.
And thank you for a great idea. If we are slightly under the maximum rate then it should be no problem. As I mentioned above, we are using this for basic expenses. We have other discretionary expense accounts we plan to tap for early retirement, not to mention another IRA and Roths.
2019-01-02 18:28, By: Retired Nomad, IP: []

L3: New SEPP Plan for January
In an earlier thread Alan stated The overall strategy we recommend is to use the highest interest rate of the prior two months along with the single life table.۝ But you are saying we should consider using a little less۝ than the maximum. Is that a conflict or am I interpreting incorrectly?
2019-01-03 01:55, By: SKRAM, IP: []

L4: New SEPP Plan for January
There are two different approaches being discussed by Alan and myself.
1. Alan is indicating to use the MAXIMUM interest rate to provide the highest annual distribution. Also, if you do not NEED that much income, then we suggest using the REVERSE CALCULATOR with the Maximum Interest Rate to determine the MINIMUM IRA BALANCE that could be used in your SEPP 72-T universe. That way you might have some part of your IRA that you can put in a separate IRA for future emergencies or contingencies in order to minimize the possibility of busting your plan.
2. My comment was because you were concerned about the exactness of your calculation or approach. In that case, I wanted you to understand that you are not required to use the Maximum Interest Rate available, and that you could also use a lesser rate from an earlier month, or could use any lesser rate that you pick in order to get an exact amount divisible by 12 if you are taking monthly equal distributions, and are concerned about the exact annual amount.
2019-01-03 05:59, By: dlzallestaxes, IP: []

L2: New SEPP Plan for January
you can also use the =AMORT formula in excel. just plug in your variables
2019-01-02 02:00, By: brkr12002, IP: [2001:5b0:50ce:86c8:9490:5144:9f54:ccfa]

L3: New SEPP Plan for January
Hmmm have never used that feature on excel but will play around with it today. Thanks!
2019-01-02 18:30, By: Retired Nomad, IP: []

L4: New SEPP Plan for January
that’s for if you are doing the amortization method, not the annuitization or life time.
2019-01-04 06:17, By: brkr12002, IP: []