Sepp distributions reasonable returns/affect on ot
L1: Sepp distributions reasonable returns/affect on otHelp folks,What are my options for having the largest distributions possible? I see the variables as balance, mortality ,and expected return, which of those may I vary to my benefit if any? I think I know some of the answers but am hopeful there are ways around the calculation limits. I also want to be sure I impact (lock up funds) only one account.Impact on different accounts. I have several IRA and Keogh accounts on which my composite returns have averaged better than 20% annually since the early 80s (granted if you chart my returns they look like a roller coaster ride). I am 54 to turn 55 in November. I want to take just one Keogh and roll it over to an IRA to begin SEPP distributions (the Fidelity master plan does not consider retirement till 59 1/2 for Keoghs for distribution out of the Keogh). Starting perhaps in January. Can I do that for the 5 year period without impacting the ability to get to those other accounts as soon as I choose upon reaching 59 1/2 (i.e. am I only locking up the funds in one account?) Expected return. When I use the various calculators it seems I must use a rate of return of 4.26% (yes I know it will vary depending on what month I set up my plan), which is substantially less than what my portfolios actually return over time, must I use the 120% mid term rate based loosely on treasury bills, with no option for using a real market rate of return?What I originally wanted to do was take x% a year of whatever the balance was …no possibility of running out , and the amount would self correct should there be a bad year , and increase if there was a good year, but I see no unpenalized way to do that, am I correct? OR is there an option for that?Mortality table. Where I am a consultant (a pension fund) we use a mortality table from the 1980s, can I use that or must I use the one used in the calculators? Fidelity seemed to indicate it was up to me when I talked to one specialist, but some of what I read indicates it is not.Balance. What balance may (must) I use for my calculations , obviously when I roll it over some time will lapse between the calculation and the actual roll over to a SEPP IRA and the distribution. My portfolio fluctuates 10-50K daily, does it matter that it may be more or less than the amount used when I calculated the SEPP? Do I just pick the balance on a particular day?Distribution. If I start monthly returns in January I use my age the following November, correct? If instead I start distributions in November , I use this year”s age? If I start this year for monthly distributions may I take a full year”s worth in November, and if so how does it affect my 5 year “clock”?Sorry for the length, but since my expectations when I set up my retirement account was I could access the money with an imputed reasonable rate of return , and I was shocked when I began exploring my options. Any help is appreciated.2008-08-25 10:08, By: Queaks, IP: [184.108.40.206]
L2: Sepp distributions reasonable returns/affect on otQueks,
I will try to answer some of your questions. The highest allowable SEPP payment per year is done using SINGLE LIFE table, and AMORTIZATION option, but it is then dependent on the highest allowable FED MIDTERM RATE that you can use, which had to be fromone of the two months preceding the first month that you will be paid, along with being dependent on your starting balance. Make sure you move this $$ to an IRA that will be your SEPP IRA and then use that starting balance after the transfer is complete. The recommendation for starting balance is one for which you have printedevidence, eitherfrom your investment firm (custodian), or from online access to your account, so you can prove it, and remember that YOUcannot add or subtract to that IRAaccount once you have selected the date of astarting balance to use in SEPP calcs.. The funds can go up or down in value, and you can buy and sell funds, but you cannot cause any balance change by addition or removal from the IRA. It shd also be within 6 month of when you start first payment. Many people who start a SEPP plan prior to 7/1/yy will use the 12/31 yy-1 value for initial balance.The AGE to use is the one you will attain by 12/31/yy of the calendar year of your first payment.. Plan on the FIXED payment option, (same total $$ each year the SEPP plan runs) where you do not recalculate after the end of each calendar year,since that uses future (somewhat unknown balance) and future (somewhat unknown) Fed Mid Term rate, so it could dramatically alter your payments when you don”t want them lowered.
The imputed rate of return, which is a field to fill in on this site”s SEPP payment calculator is just used to show what the future balance each year after withdrawals and plus earnings/interest might be in your IRA IF you earned a rate or return like you chose. I hope this answers some of your questions. KEN2008-08-25 10:58, By: Ken, IP: [220.127.116.11]
L2: Sepp distributions reasonable returns/affect on otI don”t have the time to answer all of your questions, but :
1. We always recommend having multiple SEPP plans, or keeping some of your IRA money outside of the SEPP universe for flexibility and emergencies.
2. Since you cannot stop a SEPP 72-T until the later of 59 1/2 or 5 years in the plan from the date of the first distribution, I would sugest that the earlier you start, the earlier you can end. But you have to take into account your 2008 tax picture.
3. If you start in November 2008, you have a choice of EITHER 2/12 of your annual distribution, or 100% of it. Again, your 2008 tax situation is important.
4. You cannot choose an amount you want to distribute each year. It is a calculation, but you can vary the factors to come close to what you want to do.
5. Since it will stop in 5 years, don”t worry about “running out of money”. The SEPP plan does not go for your lifetime. Between 59 1/2 and 70 1/2, you have complete flexibility from -0- to 100% of your balance.
6. If you can afford to do it, consider deferring your SS Benefits until age 70, and get 32% higher from 70 until you and your spouse both die. 2008-08-25 11:01, By: dlzallestaxes, IP: [18.104.22.168]
L2: Sepp distributions reasonable returns/affect on otYou have received two good responses. So I will just fill in on some of your questions:
1) You are restricted to the SEPP guidelines ONLY on your designated SEPP accounts. What you do with other retirement accounts does not affect the SEPP plan. In other words, you can tap the other accounts at 59.5 penalty free without affecting your SEPP.
2) You cannot exceed the 120% med term rate figure no matter what your prior results have been. If you figured those results correctly, they are very impressive.
3) The mortality table for SEPP plans was updated. You cannot use an older table, such as the 1983 GAM table. Fidelity was wrong, you do not have a choice.
4) See prior comment re balance. Do not go back more than 6 months from the month of your first SEPP distribution. And do not use a date prior to a date you took a non SEPP distribution, if any, or the account received a trailing dividend or supplemental transfer from your employer plan rollover.
5) You are correct about the applicable age. If you start this November you have the option of taking 2/12 of your annual or the full annual amount, but this does NOT affect your plan modification date, which will be 5 years plus a couple days for safety from the date of receipt of your first SEPP distribution.
Note: There has been considerable discussion of your options in your final stub year if you start in a month other than January. You should review that post by Bob Mac.
2008-08-25 17:55, By: Alan S., IP: [22.214.171.124]
L2: Sepp distributions reasonable returns/affect on otFolks,Thanks for the answers. I also met with my accountant and addressed some items. The one open item in my book is the balance I use for the calculation. Once I transfer some of my assets to the SEPP and the balance fluctuates daily, may I use any days balance and do the calculation ? Do I have to use the end of the days balance?Obviously I would have to document the balance I used by printing out the account? It is not academic to me since my balance (based on my portfolio) may move 10-20K or more daily.Again thanks.2008-08-28 10:00, By: Queaks, IP: [126.96.36.199]
L2: Sepp distributions reasonable returns/affect on otAs long as the balance you use is determined for all assets at the same point in time, eg intraday, and you print off a copy of the account assets,date, and total amount, you should be OK.
Note if that you lose that copy, replacement might not be possible, and the broker may only be able to provide the month end statement, so I would advise against taking unnecessary chances.2008-08-28 12:28, By: Alan S., IP: [188.8.131.52]
L2: Sepp distributions reasonable returns/affect on otFor whatever it”s worth I was analyzing mypotential 72T plan and noted these trends in my plan (starting at 54) (Amounts are rounded)
Each year I would delay starting the plan would increase my annual payout $500Each 1/4% increase in interest rate would increase my annual payout $1,000Each 25K increase in account balance would increase annual payout $1,500
2008-08-29 15:28, By: bob85364, IP: [184.108.40.206]
L2: Sepp distributions reasonable returns/affect on otBob — But if you delay past 54 1/2, you also delay when you can stop taking distributions because your 5-year period will then extend beyond 59 1/2. That will affect your opportunity to do great tax and retirement planninginmvolving your IRA or pension withdrawals, delaying SS to 70 to get a 32% increase for lifge for you and your spouse, ROTH Conversions (possibly at 15% tax rate), etc.
You might want to consider using a financial planning/retirement advisor who should be able to help you consider all of these other options and alternative approaches and nuanbces as well.2008-08-29 19:20, By: dlzallestaxes, IP: [220.127.116.11]