Time to Execute. What am I missing

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L1: Time to Execute. What am I missing
Leaving in August 2018 so it’s time to execute with Fidelity. I’ll be moving my 401k funds to an IRA that they (Fidelity) will assist with. Also they have informed me that the will assist with the 72t setup as well. I plan to take a distribution this yr but not sure when honestly (possibly October 1).
I’ve already setup two IRA accounts, one for the rollover and one for the working 72t. I need to review they rules of the road again on what I can and can’t do with the 72t IRA other than keeping the distributions the same.
Theplan is to take one distribution per yr of equal amounts in stead of something monthly or quarterly for simplicity. I’ll then just feed monthly targeted funds from my AMEX Saving to my working checking each month.
I’ve also read the SEPP Planning pointers and will keep that close and reference along the way. I’m sure I’m missing something so any help is appreciated.
MCNE – DOB 10/1964
2018-07-16 17:04, By: MCNE, IP: [2600:1700:1880:501f:fda0:b82e:200d:c897]

L2: Time to Execute. What am I missing
I’m not sure if this is a new posting, or a follow-up to a previous one from you.
If this is a new posting, have you checked with HR to see if there is any company stock in your 401-K, and if the NUA provisions of the IRS code would be beneficial to you ? If so, then you could be costing yourself a lot of taxes by rolling it over into an IRA, rather than doing a lump sum distribution to a non-retirement account.
Also, too bad you could not wait until January 2019 (the year you will become 55) so that you could use the “55 Rule” and not lock yourself into a 5-year plan in a SEPP until you are 59 1/2, if your company would then allow you to make periodic distributions from your 401-K plan that they would allow you to keep with your employer.
2018-07-16 17:34, By: dlzallestaxes, IP: []

L2: Time to Execute. What am I missing

First, after checking on the major factors dlz outlined and if you need the SEPP, I would do your direct rollover entirely into just one IRA. Since your balance is apparently higher than what you need to generate the desired SEPP distribution, next do a non reportable trustee transfer of the amount you wish to have your calculation based on to the second IRA account. This also has the benefit of any trailing distributions from the 401k going into the IRA that is NOT your SEPP account instead of into the SEPP account, which could bust the plan.
Next, since your max interest rate is determined by the month in which your first distribution is made, do not target the 1st of the month because you will not know for sure exactly what month that distribution will be made. Instead, request the distribution between the second and the 15th, so you will know which month your first distribution occurs in. You can then use the highest interest rate for either of the two prior months.
Finally, if you are going to take out only one annual distribution each year, after this year’s distribution, a good time to take that distribution is in April or May after your taxes are filed. You will be able to decide if you are going to withhold taxes from that distribution or use quarterly estimates. You also avoid taking the entire distribution in January which for some people can remove budgeting pressures, and they overspend and come up short. Of course, in your case it sounds like you will have the second non SEPP IRA account for emergency needs and insurance against busting your plan.
2018-07-16 17:50, By: Alan S, IP: []

L3: Time to Execute. What am I missing
Yeah I need to have two IRA accounts . I need one I can continue to consolidate with because I won’t be moving every penny of my 401k for the 72t. Plus my current employer funds I’ll need to deal with (not much).
the rule of 55 was the original plan but I would have needed to move my 401k to my current employer. That was a no go after I started speaking with them. Low confidence. The 6 yrs for the 72t will be ok for use because we have a little cash outside of it if needed.
good advice on the distribution date in 2018 plus the pull in 2019. I should be able to make it until after tax session. Will need to run thouse numbers but the current thought was February at the moment.
2018-07-16 23:44, By: Mcne, IP: []

L4: Time to Execute. What am I missing
This first part of the process to transfer between my 401k to the Rollover IRA was seamless and done in a day. Looks like I can’t move funds from the Rollover to my second IRA where the 72t will work from. Will need to call Fidelity back to execute that move I guess.
Also I was thinking that it might be better to take this first and single 2018 distribution before all of the funds are invested so that nothing needs to be sold (short term). Haven’t gotten to that point yet but its coming fast.
2018-07-18 15:28, By: MCNE, IP: []

L5: Time to Execute. What am I missing
I hope that you did this “rollover” as a direct trustee-to-trustee electronic “transfer”. These terms are used interchangeably, but for IRS tax purposes they are completely different, and the latter is the preferred approach. “Rollovers” are limited to once per 365 days. “Transfers” can be done an unlimited number of times.
2018-07-18 16:02, By: dlzallestaxes, IP: []

L6: Time to Execute. What am I missing
They told me but my notes are at home. I don’t know that this matters for me with this initial move. If it does I don’t see it at the moment.
2018-07-18 18:08, By: MCNE, IP: []

L7: Time to Execute. What am I missing
I do not know what the last two sentences of your last response mean.
If you are not familiar with the IRA ROLLOVER regulations since 2014, I suggest that you look up Bobrow vs. Commissioner TC Memo 2014-21, and IRS Announcements 2014-15 and 2014-32.
If you did an electronic trustee-to-trustee TRANSFER, then it would not affect what you have already done. If it was a “ROLLOVER”, then it could have a significant effect.
2018-07-18 18:34, By: dlzallestaxes, IP: []

L8: Time to Execute. What am I missing
Thanks, I don’t think I’ll be reading Bobrow vs. Commissioner but appreciate the content. I guess I’m not understanding what significant means to me specifically. I called Fidelity back because I have only one major concern and that concern is can I bounce my funds again that were just transferred to another IRA account for the 72t. The answer to that question was yes so I was happy to understand that better. Was told its a direct transfer when the funds are available in a couple of days without any special concession.
2018-07-18 19:29, By: MCNE, IP: []

L9: Time to Execute. What am I missing
It sounds like this was a transfer, even though many financial institutions call everything a “rollover”. If the 401-K was already at Fidelity, and the IRA is also at Fidelity, then it was a transfer.
In that case, you can do additional electronic “TRANSFERS” within Fidelity to one or more IRA accounts. Make sure to set up primary and secondary beneficiaries for each account, and consider using a Trust as the Beneficiary of your IRA(s).
2018-07-18 20:11, By: dlzallestaxes, IP: []

L10: Time to Execute. What am I missing
Yes it was but thanks for the sharing. I probably forgot to mention that everything is with Fidelity. My old company 401k and both of the IRAs. The only thing that is not is my 401k with my current company.
2018-07-19 01:23, By: mcne, IP: []

L11: Time to Execute. What am I missing
If you “separate from service”, voluntarily or involuntarily, at any time in the year you will become 55 (even before you actually become 55), then you should not roll your 401-K over to an IRA, unless your current employer will not allow you to remain in their 401-K plan and take periodic distributions after you separate from service.
By the way, I don’t remember if we mentioned that you can transfer your old 401-K and/or your IRA to your current 401-K if your current employer allows it. That way you won’t need a SEPP if you plant to retire in January 2019.
2018-07-19 01:41, By: dlzallestaxes, IP: []

L12: Time to Execute. What am I missing
That was the plan a few yrs ago and to execute everything in early 2019. My current employer would allow what you referenced but the more I talk with them the more my confidence dropped. Long story but I decided to look at other options. Soon I’ll be looking to move my current 401k to fidelity as soon as I complete my resignation.
2018-07-19 17:41, By: mcne, IP: []

L13: Time to Execute. What am I missing
Just made the move to the Second IRA or working 72t IRA as I’ve called it. I think from that point I’ll take the first distribution (Sep) before I reinvest but of course after I work through the distribution numbers first with Fidelity. I hope the current SEPP Interest rate trend holds but should be fine never the less.
2018-07-24 17:04, By: MCNE, IP: []

L14: Time to Execute. What am I missing
Another question for the experts that I think I know the answer but want to validate. Can I calculate my SEPP distribution now with July rates but actually have a distribution much later? I plan to have only one distribution per yr. Later as in anytime between now and October.
2018-07-26 20:29, By: MCNE, IP: [2600:1700:1880:501f:84d3:ac05:d786:4c0b]

L15: Time to Execute. What am I missing
Go back and read the 2nd paragraph in L2 by Alan. The interest rate must be for either of the interest rates for one of the 2 months prior to the month of your first distribution.
This is also described in the “rule” for SEPP 72-T on this website.
2018-07-26 20:38, By: dlzallestaxes, IP: []

L16: Time to Execute. What am I missing
Yep, got it. I’m in good shape on this area at least.
2018-07-26 20:56, By: MCNE, IP: []

L17: Time to Execute. What am I missing
Work is no more as I’ve moved on into what I hope to be a successful early retirement. I want to thank everyone thus far with the feedback and information that has been provided.
It looks like the September rates are favorable so I can delay my 2018 distribution until October. I’ve worked through the numbers more times than I can count to include multiple discussions. Next stop is documenting everything along with my discussion/planning with Fidelity.
Still need to reinvest the funds after the transfer into my 72t IRA. I’ll most likely leave the distribution for 2018 in cash since that withdrawal is pending. Should make it a little easier.
2018-08-26 16:14, By: MCNE, IP: [2600:1700:1880:501f:25c3:e76f:dbe2:4b87]

L18: Time to Execute. What am I missing
Looks like my assumption are good and Fidelity confirmed how I would execute each yr. pulling funds and dealing with taxes upon withdrawn. Also Fidelity has a SEPP calculator that I wasn’t aware of that was a good double check for me. The SEPP Sample Form was very helpful so I’m on my way to pull funds at the end of the month. Just waiting to get home and document with hard copies as well.
2018-09-06 20:31, By: MCNE, IP: []