L1: Starting 72TWhat is the flexibility of a lump sum distribution whenstarting my SEPP?
Currently 52, still running the #s but looking to pull as much from my SEPP as possible (about $1,100/mo). I understand that if my SEPP starts 8/1/2008 I can actually take a lump sum distribution in the amount of my SEPP 7x for January through July. I”m not convinced I need this lump sum right now… can I hold off and decide if I need the $7,700 in December or must I take it before the monthly distributions?
I appreciate your help.2008-06-20 14:47, By: MN Clem, IP: [22.214.171.124]
L2: Starting 72TIf you start your SEPP 72-T in August, then you can take EITHER your calculated ANNUAL DISTRIBUTION between then and 12/31/08, OR you can take 5/12 of your ANNUAL CALCULATION.
The amount that you “want or need” is IMMATERIAL. The allowable amount is a CALCULATION based upon the account balnces dedcated to the SEPP 72-T plan, up to 120% of the applicable interest rate, and your age when you start the plan, per the CALCULATOR on this website.
If you “want/need” $ 1,100/month, then use the reverse calculator to determine the balances to assign to your SEPP 72-T. If you aren”t sure how much you”l want/need in 2008, then wait to start your plan.
If you know that you will want/need $ 7,700 by 12/31, then you have a problem because you can only take $ 13,200 or $ 5,500 during 2008 based upon the figures you stated. It doesn”t matter how you take the $ 13,200 between 8/1 and 12/31/08 if that is the amount you want/need for 2008.2008-06-20 15:29, By: dlzallestaxes, IP: [126.96.36.199]
L2: Starting 72TI agree with dlc.More directly, if you opt to take the full 13,200, if does not matter how your distribute it between August and December. Obviously, you cannot take any of it prior to August.
To your advantage, interest rates appear to have reversed course and are now showing an increase, meaning that you could get a higher distribution from the same account balance.
Come December, it appears that you will try to ascertain whether the extra 7700 will be enough to carry you through to age 59.5. That will take somewhat of a crystall ball, but if there is any doubt I would be inclined to take it so you will have a safety margin.2008-06-20 16:20, By: Alan S., IP: [188.8.131.52]
L2: Starting 72TI had to read Alan”s response twice to understand his point, so I thought I would clarify it.
On a normal prorated basis, if $ 13,200 is the annual calculated amount, then that is $ 1,100 per month. So, August – Dec. 2008 would be entitled to $ 5,500 in any combination so long as the first distribution is in August 2008. For all calendar years from 2009 until the year before reaching 59 1/2, you would take $ 13,200 in whatever frequency and amounts you want each year. In the final year when you become 59 1./2, you must take $ 7,700, but could take $ 13,200 before reaching 59 1/2.
So Alan”s comment about the “extra” $ 7,700 is the difference between the prorated $ 5,500 or the annual $ 13,200 to be taken during 2008. While you might not need it during 2008, you might need it in total with the other payments by the end of 2009 (i.e. do you NEED $ 26,400 by 12/31/2009, or will $ 18,700 ( $ 5,500 $ 13,200) be enough ?2008-06-23 09:22, By: dlzallestaxes, IP: [184.108.40.206]
L2: Starting 72TThat”s the idea, but the 7,700 would be available as a reserve all the way to the end of the plan at 59.5 to use as a safety valve against busting the plan if more funds were needed and there were no other accounts from which to start a second plan.2008-06-23 20:29, By: Alan S., IP: [220.127.116.11]
L2: Starting 72TWhere can I find language in the code that stipulates the partial year options as stated: either prorated or full calculated amt?2008-06-25 11:14, By: Rich j, IP: [18.104.22.168]
L2: Starting 72TWhere can I find language in the code that stipulates the partial year options as stated: either prorated or full calculated amt? 2008-08-11 14:59, By: Bob Mac, IP: [22.214.171.124]