SEPP plan sanity check

L1: SEPP plan sanity check
Hello all. I want to start by thanking this entire community for providing such a great resource. This is my first post, but I’ve been lurking here for quite some time.
I’m preparing to start a new SEPP plan. Here are the details:
Birth Date: 11/1965 (I’ll turn 54 this year)
Amortization Method
Single Life Expectancy, 30.5 years
3.10% (120% March Mid Term Rate)
IRA Balance: $768,153.27 (3/9/2019)
Annual Distribution: $39,301.71 (starting this month, 3/2019)
No stub year, no recalculation
My IRA is with Vanguard, and I plan to have them withhold 10% for taxes (I’ll have other income, putting me in about that bracket).
Let me know if you see any problems or potential pitfalls with this plan.
Thank you!
– Fplanner
2019-03-09 17:53, By: Fplanner, IP: [2601:3c0:c101:4529:b83e:a859:b41e:7bc6]

L2: SEPP plan sanity check
The calcs are correct and the plan is OK, but it is not the most efficient. By using the max allowed interest rate of 3.47 you would generate an annual distribution of around 5% more, roughly 41,200 per year. Or if you expect that 39,300 will fit your needs for 5 years, you could instead partition your IRA account into one for 730,000 to support your SEPP and another IRA account outside the SEPP used for emergency needs with a balance around 38,000. The small balance IRA outside the SEPP would provide insurance against busting your plan should something happened in the future and you need more than 39,300 that year.
Of course, the RMD method with a divisor of 30.5 just illustrates how much less the RMD method produces that one of the fixed dollar methods.
Another minor point – you need to make a copy of your account balance, and would probably need a screen print for a 3/9 balance. If you used the 2/28 balance instead, not only would your balance likely be a little higher, but as a month end statement you would probably always have access to it.
As you planned this, there is no real problem. It’s just that you are passing on some possible efficiencies that would produce more dollars of distributions per each dollar of account balance.
2019-03-09 19:36, By: Alan S, IP: [72.24.226.251]

L3: SEPP plan sanity check
Thank you, Alan.
We’re planning on relying on my wife’s IRA as the emergency backup plan, so I don’t need to partition that $38K for that purpose.
I’m thinking more about using that 3.47% rate though, and taking a larger distribution. I will consider that option further. Thanks! Great feedback.
2019-03-09 20:05, By: Fplanner, IP: [2601:3c0:c101:4529:b83e:a859:b41e:7bc6]

L3: SEPP plan sanity check
You did not indicate if you are single or married. That will affect the tax rate. Singles start 12% at $ 9,700 and 22% at $ 39,476 of TAXABLE income after the $ 12,000 STANDARD DEDUCTION. Married Filing Joint tax brackets are twice the amounts above for those tax rates after $ 24,000 Standard Deduction.
2019-03-09 20:08, By: dlzallestaxes, IP: [173.59.117.151]

L3: SEPP plan sanity check
Alan,
Thank you everyone for contributing to this website and discussion forum. My situation is quite similar however with less dollars involved, and I have not yet started my plan or withdrawals.
For clarification, you would see no negative issues using my 2/28/19 IRA statement end value AND the 3.47% with the initial withdrawal this month? I am married, so I project using my SEPP, my taxable accounts (checking and normal brokerage), and my wife’s income to pay bills per a frugal yet comfortable budget. Yes, we have some additional funds built-in to my projections for a possible minor emergency. My wife’s income (around 80-120K gross annually depending on commissions and possibly peaked or trending down) does present a tax situation whether I do it this way or not.
Thank you also!
2019-03-11 16:00, By: Alpha1978, IP: [72.206.117.75]

L4: SEPP plan sanity check
ALPHA1978 — I suggest that you repost yours. By hijacking someone else’s posting, we will end up with the comingling of resposnses to 2 different situations.
2019-03-11 20:23, By: dlzallestaxes, IP: [173.59.117.151]