Timing of Annual SEPP withdrawal
L1: Timing of Annual SEPP withdrawalI am considering setting up a SEPP plan for a 401(k) from my former employer.
My DOB is 4/16/62 and I am thinking of starting the program before EOY 2017.
My question is: if I plan to take annual withdrawals (probably using annuitized method) does the IRS care when I take the distribution during the year? For example, if I take 2017 distribution in November, can I take 2018 distribution in January? Or do I have to wait until November, 2018?
And could I then wait until December 2019 to make my next SEPP withdrawal?
2017-10-05 07:08, By: KentD, IP: [188.8.131.52]
L2: Timing of Annual SEPP withdrawalSTOP !!! Do not move your 401-K anywhere until checking out the following alternative approaches.
1. You are 55 in 2017. If you “separated from service” from your employer in 2017, even before your 55th birthday, you do not need to set up a SEPP 72-T if your former employer will allow you to keep your 401-K with him, and if he will allow periodic partial withdrawals at any time for any amount (i.e. no specific pattern).
2. Your employer probably purchased company stock with his matching contribution, and any other contribution, to your 401-K, and you may have bought company stock in your 401-K as well. If so, and if the price of the company stock has increased “significantly” over the years, ask HR or the fund administrator for the NUA (“Net Unrealized Appreciation”) Cost Basis of your company stock in the 401-K. Then find a tax practitioner who understands the IRS Special Tax Provisions for NUA, and have him guide you thru the specific steps. (Also, you should read the 2-page narrative about NUA in J K Lasser “Your Income Tax”, or google NUA or Employer Stock in 401-K.)
If neither of these apply, then YES, you can take your annual withdrawals at any time, or in any frequency, in any year, and the timing and frequency can change year to year.2017-10-05 14:33, By: dlzallestaxes, IP: [184.108.40.206]
L3: Timing of Annual SEPP withdrawalUnfortunately (or fortunately in my opinion) I retired 3 years ago … so the rule of 55 does not apply.
And … company stock 401k has always struck me as stupid idea (paycheck and retirement funding tied to the success of same company … not very diversified) … so, not an issue for me.
But your confirmation that I can make withdrawal at any time in the year is greatly appreciated … exactly what I wanted to hear. Can I get an “amen” from someone else? It seems impossible to find this information on IRS website 🙁
2017-10-05 17:55, By: KentD, IP: [220.127.116.11]
L4: Timing of Annual SEPP withdrawalYes, you can take distributions at any time and in any pattern. But it is preferable to set up your plan with an IRA account, usually after a 401k rollover has been completed rather than taking the distributions directly from the 401k plan. You have complete control over an IRA account, but the employer plan can include restrictions over the 401k can reduce your control. Are you doing a direct rollover to an IRA?2017-10-05 18:04, By: Alan S, IP: [18.104.22.168]
L5: Timing of Annual SEPP withdrawalAlan means a direct electronic trustee-to-trustee transfer where you do not touch any check.2017-10-05 18:28, By: dlzallestaxes, IP: [22.214.171.124]