Percentage of IRA balance to include in SEPP

L1: Percentage of IRA balance to include in SEPPAge 52, $1mm IRA total. $48k per year needed from SEPP, 5.43 maximum allowable interest rate, amortization method:
Option 1:
Put $1mm in one SEPP IRA. Use lower than maximum allowed interest rate. Draw 4.8% per year. IRA inequity/bond mix mutual funds.
Option 2:
Put ~ $730k in SEPP IRA. Keep $270k in separate, emergency IRA. Use maximum allowable interest rate. Draw 6.63% per year from SEPP IRA..
SEPP andnon-SEPP IRA bothinvested inidentical equity/bond mixmutual funds.
Which optionis better? Option 1 has lessrisk of SEPP balance depletion in down markets. Option 2 keeps emergency funds available. Anycomments appreciated.
2005-11-22 03:43, By: Jeff, IP: [198.36.32.33]

L2: Percentage of IRA balance to include in SEPPKeep emergency funds in a separate non-SEPP IRA.
No question about it. In my opinion, of course !!
2005-11-22 06:51, By: GRT, IP: [24.145.246.118]

L2: Percentage of IRA balance to include in SEPPGood morning Jeff:
I agree with GRT that you need to split into 2 IRA accounts; one for distributions and one for emergency. And I understant your thoughts about the two options, but let me offer a third option which may give you more guarantees to be successful over your 7 to 8 year adventure.
Using the Reverse Calculator, 5.43%, Ammortization Method and $48,000 per year need, I get $723,765 for your SEPP Plan IRA. That leaves $276,235 for your emergency IRA which you can invest as you wish. But here’s my idea for your SEPP IRA.
Use a Variable Annuity with a Guaranteed Premium Withdradal (GPW) rider that will allow up to 7% per year distributions and annual step ups in contract value. This will more than cover your $48,000 per year SEPP requirement. It will provide a guarantee of your distributions even if the market tanks, and will allow for increases in the protected amount if the market goes up significantly and you make annual step ups. You get the benefits of market activity but transfer the risk of running out of money to the company issuing the annuity. Various companies have this arrangement and they use different names for the rider. No, I will not recommend one. That’s for your research to determine. And don’t worry about triggering the CDSC penalty of the VA contract. Staying at or under the 7% max distribution allowed by the rider will not trigger the CDSC. Also, look for a contract with a 3-year CDSC period. CDSC means Contingent Deferred Sales Charge.
Now I know some folks are ready to scream you should never use a VA for an IRA, but in certain situations, and I think this looks like one of those situations, I think it might make sense. Talk with your broker about this and get the information you need to make a decision. If your current broker objects, the find one who knows how to employ this option. Yes, there are costs associated with this approach, just like there are costs associated with any approach. Just remember, there are no free lunches in anything you do.
Hope this helps.
Jim2005-11-22 09:12, By: Jim, IP: [70.184.1.35]