Repayment of SEPP prior to 59 1/2
L1: Repayment of SEPP prior to 59 1/2I am beginning my SEPP this year and will need to continue until 59 1/2 as I am 51. If my financial situation changes dramatically prior to reaching 59 1/2, can I choose to pay an amount equal to all the previous distributions back into my rollover IRA and stop receiving future SEPP payments.
Wonderful forum! Many thanks.2010-04-30 19:19, By: Jeff, IP: [188.8.131.52]
L2: Repayment of SEPP prior to 59 1/2Short answer… No. Once you start a SEPP (other than for reason of death or disability) it must run until the later of age 59.5 or 5 years.
What you can do in t eh future is to take advantage of the one-time change to the Minimum Distribution method which may (or may not) reduce the planned annual distribution.2010-04-30 19:31, By: Gfw, IP: [184.108.40.206]
L2: Repayment of SEPP prior to 59 1/2NO, unless you want to incur thousands of dollars in penalties for EXCESS CONTRIBUTIONS. Once you start a SEPP 72-T, there is no turning back. You must continue it until 59 1/2, or 5-years, whichever is later.
HOWEVER, since you would have already paid the income taxes on it, you keep the money, but owe IRS 10% penalty on ALL CUMULATIVE DISTRIBUTIONS since you started the plan.
If a changing situation is a possibility, you should consider setting up multiple separate SEPP plans. That way you would owe the 10% only on the one(s) you stop.
Make sure that you carefully “reverse calculate” the amount to put in any plan(s) based upon your needs.
If you “underestimate” initially, you can always later just take occassional IRA distributions, and just pay the 10% penalty on those random distributions.2010-04-30 19:34, By: dlzallestaxes, IP: [220.127.116.11]
L3: Repayment of SEPP prior to 59 1/2Prior posts are correct. Your proposal sounds similar to the SS strategy where benefits can be returned, and you can start new benefits effective at a later date, thereby erasing an early retirement penalty.No analagous option exists with a SEPP plan. You would be hit twice:1) Busted SEPP with retroactive penalty and interest2) Excess contribution to IRA by rolling over funds more than 60 days after distribution. That rollover would have to removed no later than the extended due date or you would incur a 6% excise tax annually. And if you do remove them by the extended due date, any earnings would be taxable and subject to the 10% penalty.You might look into the one time switch to the RMD method as suggested by gfw. That will usually reduce your distribution around 40% plus or minus the % change in your account value as a very general estimate.2010-04-30 22:45, By: Alan S., IP: [18.104.22.168]