SEPP Early Withdrawal
L1: SEPP Early WithdrawalI am contemplating taking a SEPP early withdrawal from my IRA and will like to know how to set this up using the minimum withdrawal method without losing money from my account. What account should I putmoney into to make the withdrawal. I have a balance of $346,000 and need to draw a minimum of $800/mo. $1000-1200 a month would be preferrable.Any information you give me will be very helpful. Thank you very much for your time.
2009-08-12 21:21, By: Doc, IP: [126.96.36.199]
L2: SEPP Early WithdrawalStart with the calculators (http://72t.net/SeppPaymentCalculator), put in your information and based on your starting balance you will be able to see what income you need. Remember that age is your age as of December 31 of the current year.
If one of the methods produces more income that you want, use the “Reverse Calculator” (http://72t.net/ReverseSeppCalculator) to see what amount you need to allocate to the SEPP and what amount you need to transfer to a seperate IRA.
Also remember that the Minimum Distribution method will produce a different amount each year as the amount will have to be recalculated annually.2009-08-12 21:31, By: Gfw, IP: [188.8.131.52]
L3: SEPP Early WithdrawalOne other question I forgot to ask. Do I have to wait until the first of the year to begin the withdrawal or can I start receiving the payments as early as September ’09?2009-08-13 02:24, By: Doc, IP: [184.108.40.206]
L4: SEPP Early WithdrawalIf you start in September 2009, you have the option of taking a full annual payment or taking 4/12s(Sept, Oct, Nov & Dec)or the annual payment.2009-08-13 14:08, By: Gfw, IP: [220.127.116.11]
L5: SEPP Early WithdrawalWhile you had “only one more question”, you need to provide about 10 other pieces of information in order for us to provide an intelligent response.
Start with your date of birth, and the info we keep indicating in other similar postings which give sketchy info.2009-08-13 22:49, By: dlzallestaxes, IP: [18.104.22.168]
L6: SEPP Early WithdrawalDate of Birth: 4/11/1954
Plan to begin withdrawal in Sept. or Oct. 09
I have a balance of $346,600 in my IRA.
$300,000 will be allocated to the SEPP account.
The balance of my account was determined on 8/14/09.
I plan towithdraw between 800-1000/mo.2009-08-14 20:20, By: Doc, IP: [22.214.171.124]
L7: SEPP Early WithdrawalFor $ 1,000/month ( $ 12,000/year) you would need only $ 225,000 using either the Amortization or Annualization methods, but you would need $ 355,000 using the Minimum Distribution Method, according to the calculator on this website (assuming I used it correctly for the first time).
If either of the first 2 methods works for you, then you would not want to put an extra $ 75,000 in your SEPP 72-T plan, and would be well advised to keep that excess in a separate account for future emergencies.
Your timing is very good as your 5 year period will be only a few months past your becoming 59 1/2.
Are your needs any of the ones for which there are already exceptions from the 10% penalty for early withdrawals ?2009-08-14 20:53, By: dlzallestaxes, IP: [126.96.36.199]
L8: SEPP Early WithdrawalI recommend anyone planning a 72(t) SEPP to document every detail of your SEPP plan in a file memo, while it’s all fresh in your memory.If the IRS comes knocking a few years from now, it might be painful to assemble all the supporting assumptions, interest rates, dates, etc that you used. Do it now. I have a sample of whatI didifanyone isinterested (I don’t thinkI can attach the pdf file to this reply).
2009-08-14 21:16, By: Scott, IP: [188.8.131.52]
L9: SEPP Early WithdrawalThere is a good sample at…
2009-08-14 21:30, By: Gfw, IP: [184.108.40.206]
L8: SEPP Early WithdrawalActually no. I lost my job and been out of work for over a year and need to supplement my wife’s income to keep the household going until I can findone.2009-08-14 23:31, By: Doc, IP: [220.127.116.11]
L9: SEPP Early WithdrawalDoc:
In the first sentence of your first post, I read two distinct questions: (1) How do I set up a SEPP Plan and (2) how do I set up an investment plan to minimize losses of my account value. Answers to your first question are appropriate for this site and discussion board, but your second question is best directed to a qualified financial planner in your area. Look for an advisor who is really knowledgeable about 72(t) plans. Challenge him / her to be sure you have the right person.
Since you only need supplemental income until you find a replacement income for yourself, then use the reverse calculator on this site to determine how much you will need to have in the SEPP IRA to generate the needed income using the Amortization method. The Amortization method will generate the greatest income string for a given account balance. Then when you do get a new job and are ready to reduce your SEPP Plan distribution,you can make the one-time switch to the RMD Method and continue this distribution amount until you complete your SEPP Plan requirements and can make changes, like stopping all distributions if feasable.
Documentation is key to having a good SEPP Plan. This site contains all of the distribution planning and documentation forms you will need. Of course you will need forms from your IRA Custodian toset up the two accounts I believe you will need as well as transferring the funds around and starting the monthly distributions.
Jim2009-08-17 14:18, By: Jim, IP: [18.104.22.168]
L10: SEPP Early WithdrawalThanks for all of the information you all provided to me on SEPP withdrawal. I am now better preparedto move forward with my plans to begin receiving periodic payments from my IRA.
I was about to make a costly mistake before I contacted the discussion forum, but now I feel I am on solid footings with the information I received and can now proceed without the frustration of having to deal with the IRS ifthe plan was set up wrong. Againthanks.2009-08-17 15:27, By: Sirdoc, IP: [22.214.171.124]