# sepp – back to basics

L1: sepp – back to basicsCan someone clarify for me if the annual payment amount shown on the

calculators are the maximum amount I can take or is it a required fixed

amount? If the result is $12000 annually, can I agree to take

less equally over 5 years or till I reach 59.5, whichever is

longer? Or, do I adjust the amount set aside for sepp until I

reach the lesser annual amount I”m looking to take?

2008-05-09 19:50, By: richie, IP: [69.113.252.237]

L2: sepp – back to basicsRichie,It is the maximum you can take for the Amortization or Annuitization methods, but the calculator on this site is assuming that you are starting payments this month. If you were not starting until June, then you would have to replace the current 3.57 (March Max rate) “reasonable interest rate” with either the April or May 08 Max rate (April is higher) from the IRS Fed Midterm table on this site to compute the maximum on the two “A” methods for a plan with a June 08 first payment.For the minimum distribution method, no interest rate is used, so it is theexact amount you can take for the first year, and I believe that you have to recalculate it each year after that, based on the year ending balance, and your new attatined age for the next year, but I am not that knowledgeable on Minimum Distribution method.

The way youadjust down that Maximum amount for Amort or Annuit methods is to use a slightly lower interest rate in the formula for your calculation, rather than the max one that is allowed (from either of the two months that precede your first payment). So if you were going to start withthe 3.57% rate currently showing in calculator (from March 08, which is higher than April 08 rate and can still be used for May 08 first payments) you could lower the annual payment total by tweaking that interest rate down in the calculator until you got your desired result. You just cannot go up. I don”t have the formual handy in Excel, but I built it once. Others may be able to provide it if you can”t get the result that you want in terms of rounding by just changingthe 2 decimal place percent rates in this calculator.

I”m no expert, but that is how I understand this to work.

KEN2008-05-09 20:23, By: Ken, IP: [75.67.65.254]

L2: sepp – back to basicsI am not sure we understand your question.Another way of putting this is after you arrive at your correct annual distribution using the amortization or annuitization methods (leave RMD method out for now), the only choices you have are:1) If first year is not a full calendar year, you can either pro rate the annual amount by the month or take the full annual amount.2) For following full calendar years, you MUST take the full annual amount, but you can distribute it out any way you want during the year, eg annual payment, monthly, quarterly etc. You can start with installments, stop them, then make up the remaining requirement in December for example. Full flexibility. You CANNOT distribute less in one year, then make it up in the next. You must take out the exact amount in each of these years, the annual figure being both the minimum AND the maximum.3) In your final stub year determined by the longer of age 59.5 or 5 years, assuming that you have already distributed at least 60 months of distribution since the start of the plan, you can distribute either nothing, the pro rated annual amount through the month prior to the month your plan ends, or the full annual amount.

Still not totally sure if we answered your question, if not please clarify.

2008-05-09 22:19, By: Alan S., IP: [24.116.165.60]