I am now considering a SEPP, and have a few questions as follows:Any insight you can provide will be much appreciated:1) I have a younger beneficiary (I’m 54, spouse is 53), do you have to use the joint calculator and take the lower distribution?2) If a SEPP calculation at the maximum rate results in a monthly distribution of say $2,173.66, can you lower it from the start to a round figure amount of say $2,100 as long as it stays at that amount for the entire plan?3) Let’s assume I now own only one IRA with a current $550k balance, invested in a typical stock, bond and cash mix that is periodically rebalanced. I want to establish a $500k SEPP, and keep $50k outside of the SEPP for an emergency fund, realizing there would be a potential 10% penalty if that $50k is withdrawn before age 59 1/2. Do I need to set up two seperate IRA accounts to accomplish that?4) Will the monthlydistributions calculated on this IRA’s $500k SEPP-designatedbalance at SEPP inception be fixed for the entire SEPP plan’s duration (to age 59 1/2), or can it/ must it be re-calculated up or down at at some point during the plan due to investment performance or changing financial need?
Sorry for the barrage of questions guys, and thanks for your thoughts.
2010-03-25 16:38, By: BILL, IP: [220.127.116.11]
L2: SEPP1. The calculated ANNUAL DISTRIBUTION is determined initially, TO THE PENNY ( WHICH CAN BE ROUNDED TO THE DOLLAR).2. The annual distribution can not be adjusted upward or downward because of investment performance, need, or any other reason, unless you change to the other method, which can be done only ONCE.3. You must separate your IRA into at least 2 IRA accounts, one for your SEPP, and one for your emergency funds. You cannot transfer any monies between them once they are set up. By the way, this is the recommended approach to have flexibility for emergencies.2010-03-25 17:19, By: dlzallestaxes, IP: [18.104.22.168]
L2: SEPPBill,1. Almost everyone uses the single person calculation, even if married. In you case try it both ways, and with age just one year apart it may not even change the payout. Just stick with single calc even if married. With a much younger beneficiary, it can reduce the payments as I recall IF you choose to use it, but you do not have to.2. If you can get the actual 72t formula, you can keep reducing the allowable Maxinterest rate in the formula to a lower figure that gets you to theround number you want, but if you plan to be paid monthly, make sure the gross amount is also divisable by 12 with only whole pennies left!! If you are moving some money to a 2nd Non-72t IRA, then a better plan is to use the reverse calculator on this site and tell it what you want for the payout $$ per year, along with your attained age this year, and it will tell you how much to leave in the 72tIRA as thecorrect starting balance with these interest rates.Remember that the rate is only valid for payments that start in one of the 2 months after the rate is posted, so the March rate can be used for APRIL or MAY 2010 first payments. Right now, the highest available (FEB 3.39%) rate could still be used in a calc for an APRIL 2010 72t start. If you don’t plan on starting (first payment) until June or July, then redo calcs with new applicable rates before moving any money. 3. Yes.. but see #24. If you choose amortization or annuitization (Amort is slightly higher) then you can also select no recalculation, and I would highly recommend that method so it does not change. If you chose minimum dist method, you have to recompute each year with new yr end balance and new attained age for the next year, and then notify your custodian to make that payment change. I would not recommend that method, but it is a method you can change to from one of the two others “one time only” if you want to reduce your future 72t payments at some point during the 5+ years your plan will have to run to get your to age 59 1/2. That change is recommended at beginning of the year, and once you make it, you now do that recalc each year for new payout amount.Ken2010-03-25 20:29, By: Ken, IP: [22.214.171.124]