SEPP Changes

L1: SEPP ChangesI started my SEPP in Jan2000—I am taking $4k/month—utilizing the amortization method. I am 54 years old now, and afraid my SEPP will not make it until 59 1/2. At first the new rules seemed like it would really help me to lower my SEPP, but when I work the numbers under the Min Distribution method I can only take $1748/month. This is too low to live on, are there alternatives that will provide higher amounts. I need help—Thanks alot–you have a great web-site.2002-10-08 16:13, By: Billk, IP: [127.0.0.1]
L2: SEPP ChangesA few months ago I was visiting with a fried an we wre discussing possible reactions by the IRS and I almost guessed what they would do.They came out with a quick solution to a problem, not really considering what I’ll refer to as Part B – the income required by the IRA owner.At least for the present, there appears to be no other ‘out’ for relief to the shrinking fund value problem other than a change to the MD method. 2002-10-08 16:26, By: Gfw, IP: [127.0.0.1]

L2: SEPP ChangesUnfortunately Gfw is correct; your two options are to keep going or switch to the RMD method; there is nothing in between. However, let’s think this through, not from a tax perspective, but from a needed cash flow perspective.

If your IRA is running out of assets, in once sense you are just postponing the inevitable, e.g. going broke in some fashion. If that is the case, I would think it prudent to start cash flow conservation measures now to maybe $3000 a month such that you save $1000 of the $4000 distributed each month. Then, at some unknown point in the future you can then switch from your current method to the RMD method taking maybe $2000 or $2500 per month (primarily caused by your increased age) and will then be able to pick up the cash flow slack through the savings accumulated by the $1000 per month.

TheBadger
wjstecker@wispertel.net

2002-10-08 17:56, By: TheBadger, IP: [127.0.0.1]

L2: SEPP ChangesBadger, there’s one thing you’ve forgot. What started me on the search for a change to my 72t was the fact that my trustee (Morgan Stanley) is now charging for any distribution above 12% of my balance, $700 this year and $900 next year, assuming current losses stay. Even if I let my monthly withdrawals continue at its current rate, over 20% of the balance as of today and don’t worry about the 10% penalty, I’m going to be paying Morgan Stanley an increasing payment each year. 2002-10-08 18:48, By: Bob, IP: [127.0.0.1]

L2: SEPP ChangesYour numbers are not a lot different from what I am facing and the answer is the same. We can’t currently live on the $1700/month that MD would allow. I was/am using the amortization method. I was looking at making a change January 2003. We started cutting expenses and saving earlier this year. It definitely helps by building reserves of after tax dollars that can supplement the MD withdrawals in the future. I set up spreadsheets last weekend to compare making the change to MD in Jan 2003 and Jan 2004 since my understanding is that the one time change to MD may be made at any time. My individual reason was that we have been working very hard to get a new business off the ground that hopefully will help with the cash flow gap. Also, there may be a lot of us like me that can start pension benefits from a former employer at age 55. I am eligible to start benefits in January 2004. In any event, I am not making a snap judgment. For us, it may be best to draw down the account for one more year and then make the change to MD. It is an individual decision.2002-10-09 16:21, By: ChasF, IP: [127.0.0.1]

L2: SEPP Changes>2002-10-10 12:35, By: clueless, IP: [127.0.0.1]

L2: SEPP Changes>Can he “split” his IRA assets. Create IRA #1 and IRA#2. Use the Life expectancy rules on one and Amoritization or annuitization on the other?2002-10-10 12:37, By: clueless, IP: [127.0.0.1]

L2: SEPP ChangesThe option to set up multiple plans still exists, as long as they are new plans. I don’t believe you can split an existing SEPP into two different plans – all or nothing for existing plans!2002-10-10 13:03, By: Gfw, IP: [127.0.0.1]