Please Check my SEPP Information

You are here:
  • KB Home
  • Please Check my SEPP Information
< Back

L1: Please Check my SEPP InformationI’m planning to start a new SEPP soon. This will be my first SEPP.
DOB 5/4/1959
Spouse DOB 8/17/1962 although this doesn’t apply in my case.
I plan to use the ammortization method with single life expectancy
Total IRA value on 12/31/2013: $1,030,873.20
SEPP IRA value on 12/31/2013: $602,845.24
1st distribution date: 03/26/2014
February 2014 mid-term AFR: 2.36%
Calculations indicate annual withdrawal: $28,532 (rounded to nearest dollar)
5 year date: 03/27/2018 (5 years plus one day)
59-1/2 date (and first modification date): 11/05/2018 (age 59-1/2 plus one day)
Fidelity will not show me their calculations in advance so I’m choosing the fixed payment method where Fidelity sends me the same amount every year. Even if Fidelity calculates the amount they still code the tax form as early withdrawal – their rules do not allow them to code withdrawals as a SEPP.
Am I overlooking anything? 2014-03-06 02:24, By: FIREdn2011, IP: []

L2: Please Check my SEPP InformationI think your5 year date: should be 03/27/2019 (5 years plus one day).2014-03-06 13:57, By: meb24, IP: []

L3: Please Check my SEPP InformationThis is a common date of confusion. You selected the date of the 5th ANNUAL distribution, plus 1 day. The correct date is 60 months plus 1 day after the initial distribution, as meb24 responded.2014-03-06 15:18, By: dlzallestaxes, IP: []

L4: Please Check my SEPP InformationSince you are using Fidelity, don’t be surprised if your calculation derived from this site differs slightly from Fidelity. Use this site’s result, although you could use Fidelity’s calculator as a double checkto be sure you end up close.The reason is thatthe Fidelity calculatoris based on your indicated distribution frequency, and that factor is actuallyimmaterial. You are not bound to stick to any distributionpattern as long as the annual distribution total is satisfied. For a 5 year plan you are better off taking out the full annual this year, and nothing in 2019 prior to the correct modification date. Form 5329 will be required to apply exception code 02 to waive the penalty.2014-03-06 15:33, By: Alan S, IP: []

L5: Please Check my SEPP InformationHmmm…. Yes, I see that I was wrong about the 5 year and 5 year + 1 date. The 72t(dot)net calculator clearly shows the 1st modification date to be 3/27/2019.
Assuming I take the full amount $28,532 once a year, the most straightforward way to approach this (in my mind) is to take distributions on 3/26/2014, 2015, 2016, 2017, 2018 and 2019. Then stop the plan immediately after the 2019 distribution. That’s 6 annual distributions but that’s okay in my situation.
I realize I only have to take an equivalent total of 5 annual distributions during the 60 month period but it seems like Fidelity is not very flexible when it comes to these matters. I’ve already changed my approach from monthly distributions to annual distributions because Fidelity cannot guarantee when the money will be distributed. Maybe I’m making too big a deal about the distribution and need to rethink my approach.2014-03-06 19:07, By: FIREdn2011, IP: []

L6: Please Check my SEPP InformationI do not recommend to my clients for them to take annual or semi-annual distributions. I believe it is too difficult for people to have the self-discipline to not spend it and run out of money before the next large distribution.
I believe that monthly or quarterly distributions are easier to handle.
We always recomend that distributions be made by the 15th of any month, especially Dec, so that you can correct any missing or over payment. Payments around 12/27 could easily be delayed into January, and bust a plan with a Dec automatic distribution. Otherwise, there should “never” be a problem.2014-03-06 19:16, By: dlzallestaxes, IP: []

L7: Please Check my SEPP InformationI understand your concern about annual (lump) distribution but that’s not a concern for me. It would go to a separate account and I “pay” myself twice a month from that separate account. I’ve been doing that successfully for three years so I’m able to deal with the lump sums that come into that account when I sell stock or have other large transfers.
However, the quarterly distributions are sounding more appealing and maybe I should make an effort to move it to the middle of the month. If I understand the quarterly distribution method correctly I’d simply have to withdraw 4 X 5 = 20 quarterly distributions and make sure I don’t stop the SEPP too soon. An extra quarter or two would not hurt. Is that correct?2014-03-06 21:10, By: FIREdn2011, IP: []

L8: Please Check my SEPP InformationYes. Annual Amount/4 = Quarterly amount. It does not matter what months you take the distributions, so long as you do not take more than the annual amount in any calendar year.2014-03-06 23:12, By: dlzallestaxes, IP: []

L9: Please Check my SEPP InformationNote that you do NOT have to take any distribution in 2019 as you will already have taken 5 full annual distributions. Now if you enter 2019 and need funds badly and cannot wait until just after the plan ends, taking a 2019 distribution of the full annual amount will not bust the plan.2014-03-06 23:21, By: Alan S, IP: []

L10: Please Check my SEPP InformationIf you’re not going to use the full amount in the plan you should transfer into another account. This way should extra money be needed it could be taken without busting the original SEPP.
Because he has a 5 year plan if he takes a full distribution this year he cannot take a distribution in 2019 until after the expiration date. Correct?2014-03-07 01:24, By: Scott, IP: []

L11: Please Check my SEPP InformationYou are correct.
This was discussed previously – I’m in a 5 year plan and took a full distribution my first year. Taking anything after 12/31/2018 and before03/27/2019 will bust the plan. He will have taken 60 months of distributions by Dec. 2018.
If he thinks that he might need the money more in 2019 than he does now, I would suggest he not take the full distribution in 2014.
2014-03-07 02:16, By: Red Baron, IP: []

L2: Please Check my SEPP InformationI’ve learned quite a bit from your responses and still have some questions. Here’s my latest information
DOB 5/4/1959
I plan to use the ammortization method with single life expectancy
Total IRA value on 12/31/2013: $1,030,873.20
SEPP IRA value on 12/31/2013: $602,845.24
1st distribution date: 03/26/2014
February 2014 mid-term AFR: 2.36%
Calculations indicate annual withdrawal: $28,532 (rounded to nearest dollar)
59-1/2 date: 11/04/2018
5 year date: 03/26/2019
1st modification date: 03/27/2019
It’s much more clear to me now about the 5 years (60 months). Hence, the first modifcation date makes sense to me.
If I only want 5 annual distributions I will direct Fidelity not to send a payment in 2019. However, that is not the same as stopping the SEPP. I’ll stop the SEPP with Fidelity’s official paperwork and I can do that shortly after the 03/27/2019 date.
The modification date in my case is based on the first distribution. If Fidelity changes that date for some reason I will change my modification date accordingly.
I’m still leaning toward annual distributions because that’s easier for me to keep track and I’m sure I can resist spending all the money at one time since the funds will be held in a separate account.
Am I on the right track? Thanks again for your assistance.
on edit: I forgot to say that I have other IRAs that I can use to initiate addional SEPPs if needed. The IRA with ~$602k will distribute ~$28k and that should be fine for 5 years or so. DW may kick in a SEPP of her own in a few years.2014-03-07 13:37, By: FIREdn2011, IP: []

L3: Please Check my SEPP InformationI’m hoping to send my instructions to Fidelity on Saturday 3/8/2014. I think I’m on the right track based on my updated information above. Any final comments?2014-03-08 03:10, By: FIREdn2011, IP: []

L4: Please Check my SEPP InformationOkay, I’m several years into my SEPP and all is going well. I decided to use single, annualdistributions and I’ve received them in 2014, 2015, 2016 and will soon receive the 2017 distribution. In 2018 I’ll receive the 5th and final annual distribution. At that point I’ll instructFidelity to stop sending distributions. However, I will not stop the SEPP until the 1st modification date in 2019.
Any comments/corrections?
I’ve learned quite a bit on this forum and have told lots of people about the web site. Hopefully there are others who have been able to put their money to use using the 72(t) rule.2017-02-10 04:22, By: nvestysly, IP: []

L5: Please Check my SEPP InformationYour plans are correct and they comply with the distribution requirements of a 5 year plan. After you take your final distribution any time in 2018, do not take another distribution until your modification date. You do not have to do any special reporting regarding the end of the plan. With a 5 year plan, some of the last distributions may occur after you reach 59.5, and those will not require a 5329 to claim the exception because the 1099R should not be coded 1 for distributions after 59.5 UNLESS the custodian believes you have busted the plan. Post 59.5 distributions would use code 7 in most cases, and no 5329 will be needed for distributions coded 7.2017-02-10 16:29, By: Alan S, IP: []

L6: Please Check my SEPP InformationThank you for the confirmation. The 72(t) rule has really worked well for me.2017-02-10 23:38, By: nvestysly, IP: []