“Traditional” vs. “Rollover” IRAs

L1: “Traditional” vs. “Rollover” IRAsWe plan to start 72t withdrawals from our IRAs in the next few months. Excluding our Roths, we currently have our IRAs in one “traditional” and one “rollover” account for each of us. The funds in the “rollover” accounts are all funds rolled over from 401x accounts, pensions, etc. The funds in the “traditional” are all from annual contributions over the years. I assume that the reason that the mutual fund company has maintained the distinction has been to allow us to use the basis in our traditional accounts for calculating the taxable portion of our eventual withdrawals from those accounts. My questions:
1. If we split our IRAs into SEPP and non-SEPP accounts, do we need to maintain the “traditional” vs. “rollover” funds in separate accounts as well? I.e., would we each have at least one SEPP-tradtional, SEPP-rollover, non-SEPP-traditional, and non-SEPP-rollover account?
2. When calculating the taxable portion of each withdrawal, do I simply apply the original percentage? E.g., if I have $100 in my IRA, with a $20 basis, 80% of each withdrawal is taxable (right?). If I split that $100 into a SEPP and a non-SEPP account, is 80% of every withdrawal taxable as long as the SEPP plan is in effect? Regardless of the later value of that account?
Thanks for the exTREMEly helpful web site.2003-02-26 18:14, By: Dapper Dave, IP: [127.0.0.1]

L2: “Traditional” vs. “Rollover” IRAsHello DapperDave:
In most instances, a taxpayer”s basis is not terribly significant in comparison to the total value of the traditional IRA; therefore, what I normally suggest is that you first make a decision on how much or how big the SEPP IRA needs to be; then through a shuffling of the IRA deck, get all of the basis either in or out of the SEPP IRA (simply becuase keeping track of multiple IRAs each with a separate basis is a pain); resulting in one SEPP IRA and one non-SEPP IRA (per person of course).
Return of basis after that is a touch more complex in that it needs to recalculated each year based on the performance of the total IRA account. Taking your example above is correct for the 1st year. So if you withdrew $10, $2 is return of basis and $8 is taxable income. Now the IRA has $90 ($18 basis & $72 income) in it but through your astute investing you grow it to $180. Now take another $10 out. This time $1 is basis ans $9 is income as the ratio of basis to the total IRA account is remeasured each year.

TheBadger
wjstecker@wispertel.net

2003-02-26 18:40, By: TheBadger, IP: [127.0.0.1]