SEPP IRA / non-SEPP IRA distributions

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L1: SEPP IRA / non-SEPP IRA distributionsHello,
New here. I am 55. What if I set up two IRAs. I take a SEPP from one, but not the other. Later on, but before I am 59 1/2, I need an emergency withdrawal. Can I take an emergency withdrawal from the IRA that is not connected to the SEPP (providing I pay the 10% penalty on the withdrawal amount) without busting the SEPP? Has this issue been definitively decided?
Sorry if this is a common question and has been answered before. I just discovered the forum.2010-10-06 20:24, By: Rainbow99, IP: []

L2: SEPP IRA / non-SEPP IRA distributionsNo problem. This is the approach we suggest.
If you have a 401-K, search this site because you will probably not need to set up a SEPP 72-T plan. If you have a 401-k or 403-b, DO NOT ROLL OVER TO AN IRA until you research this aspect more fully.2010-10-07 02:06, By: dlzallestaxes, IP: []

L3: SEPP IRA / non-SEPP IRA distributionsYou might even avoid the penalty on distributions from the IRA that is not part of your SEPP. Any other penalty exception you might have such as high medical costs over 7.5% of AGI, health premiums if you collect UC for 12 weeks, higher education, etc. can be applied to this non SEPP IRA distribution. 2010-10-07 02:36, By: Alan S., IP: []

L4: SEPP IRA / non-SEPP IRA distributionsThanks all for your comments.
I was separated from employment last year at 54. I rolled my 401K into an IRA and left it while I’m living on severance. I am expecting a lump sum payout of my defined benefit pension. I am going to make a direct rollover of the pension payout into a separate IRA and take a SEPP from that account.
The 401k/ rollover IRA will be left for emergencies.
Am I missing anything??2010-10-07 13:13, By: Rainbow99, IP: []

L5: SEPP IRA / non-SEPP IRA distributionsSounds like you are off to a good start and your thinking is sound. Continue to research this site to be sure you set everyting up correctly.
Jim2010-10-07 16:01, By: Jim, IP: []

L6: SEPP IRA / non-SEPP IRA distributionsSTOP !! Check to see if there is company stock in the pension, and it has significant appreciation. If so, get a tax professional to discuss with you the tax benefits of the IRS provision for NUA ( Net Unrealized Appreciation ) because you lose that tremendous potential tax savings if you roll it over to an IRA. J K Lasser “YOUR INCOME TAX” has an excellent 2-page discussion on the subject. ( at your local library or super bookstore)2010-10-07 16:34, By: dlzallestaxes, IP: []

L5: SEPP IRA / non-SEPP IRA distributionsIf you became 55 by 12/31/2009, even though you were 54 when you “separated from service”, you would have been eligible for the exception to the 10% penalty for 401-K plans, and would not have needed a SEPP 72-T. If so, too bad that you didn’t find this website last year.2010-10-07 16:38, By: dlzallestaxes, IP: []

L6: SEPP IRA / non-SEPP IRA distributionsI turned 54 in 2009. No company stock. Got out of it long ago.
Again, I appreciate all the thoughtful input.2010-10-07 21:41, By: Rainbow99, IP: []

L6: SEPP IRA / non-SEPP IRA distributionsIf you proceed with the SEPP, note that with two separate rollover IRAs from different plans, you will have a balance in each IRA that will almost certainly not provide you with the correct breakdown for your SEPP IRA starting balance and your other non SEPP IRA. To optimize the balances in those two IRAs simply do a direct trustee transfer from one to the other to get those balances right. Use the reverse calculator on this site to determine what balance you need in your SEPP IRA account to generate the income you need over the term of the plan.2010-10-07 21:42, By: Alan S., IP: []