Setting up new SEPP

L1: Setting up new SEPPNew to this site.
I am planning to make first SEPP withdrawl from IRA o/a 1/15/06. Will be 58Nov.this year (2006).The 5 yr. min. withdrawl period will get me to Soc. Sec. payments when I”ll be able to discontinue IRA withdrawls until 70-1/2.
IRA Balanced Dec. 31, 2005 = 360K. I don”t need the full 120% of mid-term rate. Is it too late to separate this IRA into two IRA”s & use the reverse calculator to set one IRA for amount actually needed for next 5 years (just in case I would need more before the 5 years)?
If so, do I just use the total amount I put in the NEW IRAto determine thebalance to use for the figuring the annual withdrawl amount?
*** Also saw a previous Post regarding State Tax with a notation (EXCEPT PA). Is there a reason for exception with PA State tax. I thought I would have to pay PA tax until 59-1/2, but not sure if there is an except for PA residence ***
Any suggestions would be appreciated. Thanks – meb24
PS: This was a rollover from “Cash Out” Pension 4 yrs ago (under 55 at that time)– Not a 401k rollover2006-01-02 10:16, By: meb24, IP: [69.248.187.178]

L2: Setting up new SEPPYou should have time to spit the account into two accounts if possible, with 2 different custodians/trustees if not, then with at least separate account numbers.
If split, use the account balance for the SEPP IRA after the transfer occurs.
Re PA, check with someone knowledgeable with PA taxes no idea.
Also make sure that the plan exists for 5 years (5 times 365 days plus a few days for leap year) from the date of the first payment.
Good luck! 2006-01-02 16:24, By: Gfw, IP: [172.16.1.75]

L2: Setting up new SEPPGwf:
Thanks for your response.
Question regarding your last paragraph: “Also make sure that the plan exists for 5 years (5 times 365 days plus a few days for leap year) from the date of the first payment.”
— I assume the 5 years you are referring to is5 years after first payment to meet the 5 year requirement for the SEPP, because the IRA rollover has only been established foralmost 4 years (3 yrs-10 mos.).
Also, I will be taking monthly payments. Therefore, I figure my last payment will be 12/15/10. That will be 60 payments (12 mos. x 5 years), Atthat time, I will be over 59-1/2 and can stop payments after 1/14/11. Please let me know if this senario is correct.
Thanks for your help.
meb24
2006-01-02 16:47, By: meb24, IP: [69.248.187.178]

L2: Setting up new SEPP>>because the IRA rollover has only been established for almost 4 years (3 yrs-10 mos.).The age of the IRA is immaterial 5-Years applies to the SEPP.
>>Therefore, I figure my last payment will be 12/15/10Check out the Last Payment Date۝ calculator for the first modification date – any change before that date may cause trouble.2006-01-02 17:45, By: Gfw, IP: [172.16.1.75]

L2: Setting up new SEPPGfw:
Thanks for your help. I’ve pick up a lots ofinformative information from the site, especially in the discussion forum section.
Keep up the good work! I’ll check back often.
meb24
2006-01-02 18:47, By: meb24, IP: [69.248.187.178]

L2: Setting up new SEPPmeb24,
I made the original post you are referring to; here’s a little more detail.
While working in PA, I contributed pre-tax dollars to a 401k from 1986 to 2003.These dollars were pre-tax for federal purposes only; the full state tax was always deducted by my employer. Now the 401k administrator did a great job of tracking ‘my pre-tax contributions’so when I retired and rolled the money into a rollover IRA, I hadexacting records on how much money had already been taxed by the state; thereby, qualifying me to use the PA state’s “cost recovery method’ on my IRA withdrawls.
———————————————————————————————————————
This Q and A was copied from the PA state website:
Question How do I determine if my IRA withdrawals are subject to PA income tax? Answer Distributions from an IRA are not taxable if the payments are:
1. Received, including lump sum distributions, on or after retirement, and after reaching the age of 59 1/2.2. Paid to the estate, or designated beneficiary, of the participant by reason of the participant’s death.
Distributions you receive before age 59 1/2, even if you are retired, are taxable even if you receive substantially equal payments, and for federal purposes, you do not pay a penalty for an early withdrawal. Distributions from an IRA, including a federal Roth IRA, are taxable to the extent the distribution exceeds your previously taxed contributions. Further, under the cost recovery method, the taxpayer is required to remove his contributions first and then the untaxed portions.
PA law does not have any exceptions similar to the federal exceptions for withdrawal before age 59 1/2. Here’sa direct link to the Q and A at the state website:
https://revenue-pa.custhelp.com/cgi-bin/revenue_pa.cfg/php/enduser/std_adp.php?p_faqid=365&p_created=1038892542
Good luck,
gus
2006-01-02 20:12, By: gus, IP: [70.110.136.117]

L2: Setting up new SEPPHi gus,
Read yourresponse & referred to the hyperlink for PA Revenue Q&A.
None of this Rolloverwas ever taxed by the state (It was a lump-sum “Pension Cash Out”. My interpretation is that I will owe PA State Tax on all withdrawls until 59-1/2.Am I correct on thatassumption? There is no Cost Recovery Amount & IRA withdrawls after 59-1/2 are PA TAX FREE if I interpret the information correctly.
Thanks,
meb242006-01-02 21:29, By: meb24, IP: [69.248.187.178]

L2: Setting up new SEPPmeb24,
I agree with your interpretation; however, I am just an ordinary retiree. I am nota tax professional. If I were you, I wouldpostyouassumption/interpretation (as you wroteit here) on the PA Q& A website. They will respond and you can save their response for posterity. I would alsoobtain a confirmationfrom a knowledgable PA tax professional as well.
Good luck,
gus2006-01-02 22:43, By: gus, IP: [70.110.136.117]

L2: Setting up new SEPPThink about getting Bill Stecker’s book or disc, A Practical guide to SEPP and IRS Code 72(t). You can get it thru the site.
It is a very good, simple guide to a complex situation.
Good luck.2006-01-05 10:42, By: Bob, IP: [207.200.116.201]