Newbie questions…..

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L1: Newbie questions…..I am researching setting up a SEPP. Have funds in a rolled over 401K now a self managedIRA.
Question: If I separate some funds for the SEPP now, what starting balance do I use? I do not wish all of the funds to be used in this SEPP. Is it imperative that the fund account exist prior to the previous Dec. 31st?
Question: Since I am not yet 59.5 in age does the IRS care what I do with the distrubuted funds as long as I record them as ordinary income at years end?
These are perhaps neophyte questions but any clarity offered is greatly appreciated. 2008-03-19 15:13, By: upbeatguy, IP: []

L2: Newbie questions…..Hello upbeatguy:
1. You would use the starting balance after you segregate some of the funds out into a 2nd separate IRA. Assume you did that today. Then, tonight you could value the remainderman IRA online (because you use a discount broker which has daily valuation & online features) and use that balance as your beginning balance for your SEPP plan.
2. Irrespective of your age, the IRS does not care what you do with the money.
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2008-03-19 15:29, By: TheBadger, IP: []

L2: Newbie questions…..Thanks Badger……one follow up question.
Running some numbers through a calculator leaves me with a SEPP balance at the end of a hypothetical 7 year distibution period. At the end of a prescribed SEPP period is the SEPP account balance returned to simple IRA status and available for the traditional IRA investment vehicles?2008-03-19 15:34, By: Upbeatguy, IP: []

L2: Newbie questions…..Hello upbeat:
I think the answer to your question is YES; but not in the manner you asked it. The “SEPP period”, in your case 7 years, relates to the sameness of your annual distributions. The character of the IRA, per se, never changes; e.g. all investments that are permissible for an IRA can be made for any IRA including one that has SEPP distributions being made. What does happen at the end of 7 years is the SEPP plan ends and then you are free to make whatever distributions you want in an unstructured fashion from the IRA.
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2008-03-19 16:03, By: TheBadger, IP: []

L2: Newbie questions…..The only way you have a 7-year SEPP 72-T pewriod is if you are 52 1/2 when you start the SEPP 72-T because it is the later of 59 1/2 or 5 years. Anyone younger than 54 1/2 has until 59 1/2. Anyone over 54 1/2 has a 5-year period.
I hope you weren”t 54 1/2 when you rolled over a 401-K into an IRA. If so, it was probably a bad move, but too late now.2008-03-19 22:06, By: dlzallestaxes, IP: []