Pension Lump Sum – IRA – SEPP B4 Age 59-1/2 = penalty???
L1: Pension Lump Sum -> IRA -> SEPP B4 Age 59-1/2 = penalty???My husband retired Aug 1, 2017, two weeks before his 57th birthday. He rolled his defined benefit pension payout as a lump sum (a bit more than $600K) into a traditional IRA. Our financial advisor says he can now begin taking SEPP payments of $5000/month starting 10/1/17; she says he is exempt from the 10% early withdrawal penalty because he will take the payments for five years and he is now unemployed. He would have regular federal and state income taxes withheld from the payments.
However, when we ran this idea past our tax prep guy, he advised caution – he was concerned that because the funds were not always in an IRA, but came from a defined benefit pension payout, the exemption from penalty would not apply. Who is right here? Other info that may be helpful: We are in California; I (the spouse) am age 58 (born 2/1959). 2017-09-18 18:53, By: Aratinga, IP: [18.104.22.168]
L2: Pension Lump Sum -> IRA -> SEPP B4 Age 59-1/2 = penalty???Did you speak to the financial advisor before your husband rolled over his defined benefit pension to the IRA ?
Did he have a 401-K ?
Was there company stock in his pension (or 401-K) ?
Isn’t there any way you can “finance” his retirement for 2 1/2 years until he is 59 1/2 ? Don’t you or he have any outside non-retirement investments, or a home that you can use for a home equity or letter of credit until he is 59 1/2, rather than being locked into a SEPP 72-T for 5 years ?
Has your tax prep guy or financial advisor told you about other exceptions to the 10% penalty that you could qualify for in the interim ?
By the way, once money gets into an IRA, regardless how or from where, the 10% penalty, or exceptions, apply for early distributions before 59 1/2. He might have been eligible for an exception if his company allowed partial distributions from his retirement at age 57, until he reached 59 1/2.2017-09-18 19:49, By: dlzallestaxes, IP: [22.214.171.124]