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: [184.108.40.206]
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.
2008-03-19 15:29, By: TheBadger, IP: [220.127.116.11]
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: [18.104.22.168]
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.
2008-03-19 16:03, By: TheBadger, IP: [22.214.171.124]
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: [126.96.36.199]