SEPP and Taxes

L1: sibghat1
Planning on taking SEPP on my vanguard 401K with amoratization method (joint) with interest rate 3.15%, 5% invest interest rate, distribution rate of investment 5% at age 48 getting around $41K a year for next 11 years (until hitting 59 and half). My question is that if what will be right time to start SEPP I want to start distribution in August but the interest accrued is prorated first year or should I wait till early next year (a bit confused or dont understand the whole amorotization table)? Would this income count towards the total income earned (have another regular job income in addition to SEPP) for calculating income bracket if filing jointly?
Also, already seperated from employment so I know can use 401K (dont need fund from it) but is it wise to open new seperate IRA and pull money from there? There is a certain budget amount each year around 41K I am working with here? Any suggestions
2019-04-02 22:14, By: 401K-SEPP, IP: [68.232.218.137]

L2: sibghat1
The 12% federal income tax bracket is up to $ 77,400 of TAXABLE INCOME. Married Filing Joint gets a $ 24,000 STANDARD DEDUCTION under TCJA (new tax law). That is a TOTAL GROSS INCOME of $ 101,400 that you can have taxed at 12%. If you have little or no other income, then you are well within the 12% tax bracket. The ANNUAL DISTRIBUTION is included in your personal income taxes, regardless of the Income (Interest, Dividends, or Capital gains) within the account.
If you need $ 41,000 to spend, then that is after taxes (federal and state). So you will need about $ 46,000 to be generated by your SEPP 72-T regardless whether you have the taxes withheld (preferred approach), or take a full distribution, and pay your estimated taxes quarterly, and don’t spend that money.
You did not indicate the size of your 401-K that you are questioning whether to keep it where it is, or to do an electronic trustee-to-trustee transfer. That decision is based upon 1) if your employer allows you to continue in their plan after separation, and 2) if he does, are you satisfied with the limited investments offerings in the 401-K, or do you want the full universe of all stocks, bonds, and mutual funds available in an IRA?
The size of your account will determine the ANNUAL DISTRIBUTION. In addition, this amount is a CALCULATION based upon a formula, and YOU cannot take any amount that YOU want. So, probably forget the 5% figure that you mentioned. And even if your account is $ 800,000, your calculated annual distribution may be less than $ 41,000 or $ 46,000. Further, most of us would normally not suggest taking more than the 4% guideline from ALL financial and tax advisors.
2019-04-02 22:39, By: dlzallestaxes, IP: [173.59.117.151]