Two IRA plans – Traditional and Roth – How to
L1: Two IRA plans – Traditional and Roth – How to
1. If I have two IRA plans – one traditional and one Roth at the same custodian, calculate my SEPP on a combined balance, can I then take the distribution from only one of the plans, e.g. Roth only?
2. If the distribution is taken from both plans, how do you manage the the situation that while Traditional funds are taxable, Roth funds are not taxable?
3. As the account holder, will I be expected to contact the custodian each time each time prior to distribution is made in order to sell/convert the current investment, like mutual fund, into cash form?Thanks,Exchequer12 (Projected SEPP effective date – 1/2/2018).
2018-01-11 21:56, By: Exchequer12, IP: [220.127.116.11]
L2: Two IRA plans – Traditional and Roth – How to
1) Yes, you can do that but it may not be the last long term solution tax wise. In fact, if you had enough regular Roth contributions and conversions over 5 years old, you could take out that amount without tax or penalty and would not need a SEPP plan because there would be no penalty to waive. You are of course also spending down valuable Roth assets.
2) You can also mix and match the distributions according to how much tax you wish to incur. The TIRA distributions would be taxed, but the Roth distributions would not until you got to the Roth earnings. The Roth distributions must be reported on Form 8606, and any taxable amount from either IRA type will end up on line 15b. The IRS does not see many combined TIRA-Roth SEPP plans, so taking distributions from both could trigger an IRS inquiry, although it is allowable.
3) You would want to distribute cash, so would sell investments as needed to generate the cash for your distributions. You can normally do this on line with most IRA custodians, but would have to coordinate asset sales with your distribution pattern (eg monthly, quarterly, semi annual, annual, or random.) Your SEPP payment will be less than 5% of the account value annually, so you could just do the selling once a year and plan to keep at least 5% of your IRAs in cash (usually a MM fund).
4) Projected effective date? 1/2 has already passed.
2018-01-12 01:20, By: Alan S, IP: [18.104.22.168]
L3: Two IRA plans – Traditional and Roth – How to
We might be able to give you better, more definitive responses if you gave us your facts, such as DOB, 12/31/2017 balances in both accounts, and cash needs and projected tax situation (including marital status becuase of tax rates).
2018-01-14 17:27, By: dlzallestaxes, IP: [22.214.171.124]