Review my SEPP plan
L1: Review my SEPP plan
I have reviewed all the post on this site and would like to verify my numbers before I pull the trigger on my SEPP plan.
Specifics: I will be 52 this year, DOB: 2/24/67, wife 56,she has started her pension, mine doesn’t kick in for 5 years, we will both have SS in the future. I would like to start an SEPP out of my TIRA. Current ballance is $199,417.39. Start date 1/21/2019. I would like to keep it as simple as possible. 1 annual payment in January every year. We dont need an exact amount to live as we have my wifes pension and an taxable investment account to make up shortages. My plan is using amortized method, single life, 3.6 % interest rate, life expectancy of 32.3 years. The numbers I come up with are $10,542.90.
My main concern is to avoid any IRS penalties and the 10% tax for early withdrawal. I was unable to find any forms for doing the calculations manually. This makes my nervous. Just looking for reassurance that I am doing this correctly.
My IRA is with Vanguard, they will issue the 1099-R, with 1 as the code for withdrawl and I will have to file form 5329 with my taxes. Thanks for any help.
2019-01-08 14:32, By: JW, IP: [2600:1702:1150:30d0:9d8e:5acc:3545:718e]
L2: Review my SEPP plan
About 6 months before your wife is approaching 62, I suggest that you meet with an experienced qualified financial planner, or tax professional, to do “PLANNING DURING RETIREMENT” to coordinate the SS options, deferral of SS benefits until 70 for the higher earner, and starting IRA distributions or ROTH CONVERSIONS in the 12% tax bracket, which is about $ 100,000 of Gross Income ( $ 80,000 of taxable income) under the new tax act. This should be done for at least ages 59 1/2 thru 72.
When your SEPP 72-T terminates at 59 1/2, your wife will be 63+.
2019-01-08 15:44, By: dlzallestaxes, IP: [184.108.40.206]
L3: Review my SEPP plan
Thanks for the reply. We have a CPA, who does our taxes, however, that is the only services provided. We have investments with Vanguard and I am on bogleheads all the time. I am aware of the benefits of delaying SS and planning for future RMD’s.
The main reason for doing the SEPP is using it as a bridge until pension and SS kicks in.
*My main question here is: Are my numbers correct for the IRS. What forms do I use to document how I arrived at my numbers. Do I just print from the internet sites that provide interest rates, life expectancy, etc. Thanks
2019-01-08 16:06, By: Review my SEPP plan, IP: [2600:1702:1150:30d0:9d8e:5acc:3545:718e]
L4: Review my SEPP plan
It may be unbelievable, but there are NO FORMS to file with the IRS. The only DOCUMENTATION is your own print-outs of whichever IRA account(s) you choose to include in your SEPP IRA “UNIVERSE” to show the Balance that you are using and its date, your Date of Birth, and the Interest Rate YOU choose to use which does not exceed the federal rate.
2019-01-08 17:15, By: dlzallestaxes, IP: [220.127.116.11]
L5: Review my SEPP plan
There is a sample form for “SEPP documentation” link in the planning pointers under the “72t plans” tab on this website.
Your figure of 10,542.90 is correct, but would be a little higher if you used the max allowed interest rate of 3/69, and if your IRA account balance was higher on 11/30/2018, use that balance.
The S&P 500 dropped 9% in December, but since it has risen somewhat this week, the 11/30 balance would be “reasonable” if your holdings represent the overall market. Of course, if you hold individual stocks that were big losers after November so that your year end balance dropped much more than 9% in December, then using the November statement balance might be too high. Of course, any major dislocations between now an 1/21 might also affect what balance would be too high to be reasonable.
2019-01-08 23:57, By: Alan S, IP: [18.104.22.168]
L6: Review my SEPP plan
Just a note of interest — You are not required to use a month-end balance. You are permitted to use any balance that you can document, such as at the end of any day that you printed out.
2019-01-09 05:21, By: dlzallestaxes, IP: [22.214.171.124]
L7: Review my SEPP plan
Thanks for the responses. The form you mentioned under 72T plans is what I was looking for. I just wanted to have all my info on one page and keep for future IRS needs, if needed.
I contacted Vanguard and they will start my SEPP this month, however, they only use the numbers I provide and take no responsibility for errors. Again, thanks for the responses.
2019-01-09 14:45, By: Review my SEPP plan, IP: [2600:1702:1150:30d0:9d8e:5acc:3545:718e]
L2: Review my SEPP plan
You can also use excel to calculate for single life expectancy/amortization;
=pmt(rate, nper, pv); =pmt(3.6%, 32.3, 199417.39) = 10,542.90
Correctly verifies your number.
2019-01-10 20:32, By: SKRAM, IP: [126.96.36.199]