Setting up SEPP

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L1: Setting up SEPPHello. I am going to start a SEPP plan using my 2 IRA’s. I also currently have a SIMPLE accountwith Vanguard and plan on using funds from that account for my monthly proceeds. Can that be done,or do I need to rollover that SIMPLE account into an IRA? Or, if I can’t use that account to drawfrom, I’m guessing that I’ll have to rollover funds from one of my other IRA’s into Vanguard. Myother 2 IRA custodian do not do SEPP’s. Thank you for your repsonses.2011-03-08 16:09, By: Bruce, IP: []
L2: Setting up SEPPThere are several options available here, but you first need to determine how much of an account balance you will need to generate the distributions you need from the SEPP. Since a SEPP will generate about 5% of the account balance for your distribution, you can determine how many of the accounts must be used for your SEPP calculations. Once you figure that out, you can determine how you want the accounts set up and possibly do some transfers to get the money into the right accounts.Also, note that an IRA custodian does not have to support your plan. Your plan is between you and the IRS and does not need their blessing, although their support is still desireable. If the SIMPLE account is to be included in the balance, it must be an inactive SIMPLE account and if it has been at least two years since you first contributed to it, you can have Vanguard transfer it into a traditional IRA before you start your plan. But first you need to answer the above questions, then decide from there how best to set up the accounts.2011-03-08 19:38, By: Alan S., IP: []

L3: Setting up SEPPDo not overlookan important comment in Alan’s response. When did you start your SIMPLE IRA ? If it was within the last 2 years, you cannot roll it over to an IRA.If you provide amounts for each of your accounts, and your date of birth, we can help give you some guidance as to what you can, and cannot, do. Also, how much do you need the SEPP to provide for 2011, and then for each future year ? What is your projected tax bracket for 2011, and future years ?2011-03-08 19:43, By: dlzallestaxes, IP: []

L3: Setting up SEPPHello. The SIMPLE account is inactive, and was started in 1998. I plan on doing an initiation date from the beginning of the year, so would I be able to include the SIMPLE account in the total if I roll that over to an IRA?
Also, I see there is another reply as far as giving amounts etc. Should I provide that information in this forum? Thanks.2011-03-08 20:10, By: Bruce, IP: []

L4: Setting up SEPPYes. Several responders on this site are very generous with their time in helping to give you some good guidance, at no cost, unless your situation is much more complicated than it appears from your posting so far. But, your date of birth is critical for an informed answer.2011-03-08 20:14, By: dlzallestaxes, IP: []

L4: Setting up SEPPYour comment…I plan on doing an initiation date from the beginning of the yearThe effective date of the SEPPis the date of the first distribution. If the 1st distribution occurson April 5, 2011then the effective date is April 5, 2011.2011-03-08 20:20, By: Gfw, IP: []

L5: Setting up SEPPHe might have meant that he was going to use the 1/1/11 (12/31/2010) valuations as his “initiation date”, rather than as his distribution date.He might not understand that even if he starts his distributions in April, or December, he could take an entire year’s distribution, or a prorata one.If he would only give us the facts ( as Joe Friday used to say), then we could stop chasing our tails and running around in circles. ( Only we older practitioners even know who Joe Friday was !!!)2011-03-08 20:35, By: dlzallestaxes, IP: []

L6: Setting up SEPPDlz… And do you remember the badge number? 20:57, By: Gfw, IP: []

L7: Setting up SEPPBadge 714.And I didn’t have to look it up!Jim2011-03-08 21:00, By: Jim, IP: []

L6: Setting up SEPPYes, he (me) meant I was using 1/1/11 valuations as initiation date, sorry! The facts maam, just the facts, are dob of 2/12/55. What was Joe Friday’s partner’s name? Sorry off the track.2011-03-08 22:02, By: Bruce, IP: []

L5: Setting up SEPPBruce:After you determine how much cash flow you need on an annual basis, use the “Reverse Calculator” on this site to determine the total dollars you will need to fund your SEPP Plan. Then use the “Trustee-to-trustee” transfer method to set up the IRA account(s) withthe necessaryamount of funds for your plan. DO NOT try to make FINAL PLAN CALCULATIONS or take any distributions UNTIL AFTER all funds have transferred into your SEPP Plan universe IRA account(s). Also, be aware that any trailing dividend, capital gain and interest earned in the old accountshould follow the initial transfer from the old account into the new account. So you will probably need to wait for a period of time to allow any trailing assets to complete their transfer before making your calculations and definitely before taking the first distribution which marks the starting date of your SEPP Plan.Jim2011-03-08 20:36, By: Jim, IP: []

L6: Setting up SEPPHi Jim,
DO NOT try to make FINAL PLAN CALCULATIONS or take any distributions UNTIL AFTER all funds have transferred into your SEPP Plan universe IRA account(s)
I’m a bit confused by that statement. Don’t I base my calculations on the value of the IRA’s on 12/31/10? Then I will take distributions based on that figure? 2011-03-08 22:07, By: Bruce, IP: []

L7: Setting up SEPPWhy did you have to get back to this technical stuff ? We were having much more fun with the Joe Friday diversion !!!
Anyway, yes, you use the 12/31/2010 balance, or one more recent if it fits your situation better. But, we are warning you to get any new accounts or transfers all done and finalized before you start taking any distributions. Even more important, however, is to determine your cash flow needs, and the tax consequences, for 2011 BEFORE you do anything further. This can help minimize how much you might have to commit to the SEPP 72-T. Also, what were the balances in these accounts as of 12/31/2010, and each month since, if significantly different ?2011-03-08 23:09, By: dlzallestaxes, IP: []

L8: Setting up SEPPChief, I missed setting up this SEPP account by…… that much…..oh, wrong show. Anyway, I’m back from caring for my Dad.
The total of the 2 IRA’s I was going to use, as of 12/31/10 were $136,494.72. So, it looks like my amounts if I had started on 3/1 would have been:

72(t) Annual Payments

28.7 Years
Life Expectancy

$4,755.91 [$396.33/mo]
1] Minimum Distribution Method

$6,982.93 [$581.91/mo]
2] Amortization Method

$6,952.67 [$579.39/mo]

3] Annuitization Method

2011-03-11 18:48, By: Bruce, IP: []

L9: Setting up SEPPBruce,I didn’t proof your numbers, but if those are true for 3/1/2011, they can still work for a plan with first payment made later in the month of March 2011. I assume you can still submit the paperwork and get a custodian to start a plan for youwith aMarch initial payment. You can also wait and start it in April, when max rate is a bit higher in the calcs, so higher payout. Always choose Amortization (highest payout) and remember if you don’t need this large a payment at some point in the future during plan years, then start the next year by changing to Minimum distribution (that you would recalculate each year till plan ended) so you have a much lower payout going forward. Don’t forget, if your combined balance on 2/28/2011 statements exceeds the year end 2010 balance, you can use that tocompute the plan. Ken2011-03-11 20:37, By: Ken, IP: []

L10: Setting up SEPPHi Ken,
I think I’m aiming at a 4/1 start date at this point, and my 3/31/11 combined balance SHOULD be more than my year end balance. Oh, and I got the figures from the calculators here so I know they’re right. Thanks!2011-03-14 21:44, By: Bruce, IP: []

L11: Setting up SEPPSince you are using the 3/31 balance, I assume you will not be ordering the distribution until April. That is fine, but just in case, be advised that your starting month is the month in which the distribution is issued, NOT the month that you receive it. That is also the trigger date for custodian issued 1099R forms. If you set up an automatic distribution plan, it is best to use a date between the 5th and the 15th of the month. That gets you away from a possible year end glitch but still get your last payment to you in plenty of time to recheck your annual total.2011-03-15 03:52, By: Alan S., IP: []

L12: Setting up SEPPSo then I will take my first distribution between the 5th and 15th of next month. That sounds good. Thanks Alan.2011-03-15 14:12, By: Bruce, IP: []

L13: Setting up SEPPIf you haven’t already reviewed, check out our Planning Pointers page at 14:24, By: Gfw, IP: []

L14: Setting up SEPPHello. I’m back one more time again. I am going to be taking my distributions from a custodian who will do a 1 on my 1099-R. (no known exceptions).
Should I file the 5329 form this year, or will that be done next year? My guess is next year. Thanks.2011-03-24 20:56, By: Bruce, IP: []

L15: Setting up SEPPThe 1099R will be issued next January for 2011.Your 5329 would change the 1 coding to exception code 02 and go on your 2011 tax return filed next year. I think that is what you also concluded.2011-03-24 22:53, By: Alan S., IP: []