Using a cash account
L1: Using a cash accountThe Planning Pointers page suggests establishing a cash fundwithin the IRA account from which you will be making your SEPP payments. The idea is that, with the cash fund, you are guaranteed to get the exact amount you are requesting. Today I talked with a representative from Vanguard, however, and he didn’t think the cash fund would be necessary in that there shouldn’t be any problem getting the exact amount. (Note that none of the relevant funds are ETFs.) Has anybody had any issue getting exact amounts from Vanguard without using a cash fund as an intermediary?2015-05-27 00:11, By: KarenC, IP: [220.127.116.11]
L2: Using a cash accountI am guessing that they mean a “money market fund” within an IRA, which if properly funded and watched by you, will always have enough to cover the IRA withdrawals that you have planned. I have one in my Vanguard IRA, (I think they are automatically set up, so your stock and mutual fund sales proceeds end up in the money market account, rather than being sent to you.) MyVanguard IRAhas 5 Vanguard funds, and 4 outside mutual funds, and my withdrawals are done monthly, (from the Money Market account) so I just have to keep an eye on the “cash account” balance, (as you call it) to make sure it has enough for the next several months. Mine has about a year’s worth in it now. If you don’t have enough money in the cash account, and are on the last 72T payment of the calendar year, they may not make the 72T payment in time, since Vanguard will notknow which of your funds that you want to sell to convert to the cash you need, so I disagree with the answer that you got.
Youdon’t need enough cash for a whole year, if you are taking monthly payments, for example, but you would need that year’s worth if you taking an annual payment, as long asyou got it into the money market account before the payment was to be made.When mineruns low in cash, I just pick a fund, and sell some shares, and have them put the cashinto my Money market account. I think it is as simple as that.2015-05-27 03:37, By: Ken, IP: [18.104.22.168]
L3: Using a cash accountI would also use the money market/cash account as a repository for the dividends during the year, especially the December capital gains dividends. I would not re-invest dividends in a SEPP 72-T, nor in an IRA if over 70 1/2 and needing cash for the annual RMD in January for my clients, but possibly in Dec for taxpayers who don’t understand why it should be taken early in the year, and like to wait to the last minute to take their RMD each year.
You can also take “distributions in kind”, but that can be very tricky to get the exact distribution, but can be helpful to keep the same investments but transfer them from the SEPP 72-T IRA to your non-retirement account. In that process, you want to distribute the shares on the low side, so that you can use the exact cash that you need for the annual amount. However, if you are going to need cash anyway early in the next year, then just sell shares within the SEPP 72-T to get the amount you need to distribute.2015-05-27 15:48, By: dlzallestaxes, IP: [22.214.171.124]
L3: Using a cash accountTo keep things simple, I’m planning to take the money as an annual transfer from my Vanguard account to my bank account.
From Planning Pointers page, I had gotten the impression that, in the past, some folks had, when requesting their distribution, asked for a certainamount but had received an amount that was slightly different and, as a result, busted their SEPP plan. For example, if the plan said that the annual distribution should be $7,489.27, and that’s what they requested, but insteadthey received $7,487.92.2015-05-28 17:16, By: KarenC, IP: [126.96.36.199]
L4: Using a cash accountKaren,
I have a fidelity brokerage account that I’ve tied to my credit union checking account. I go online and do my transfers myself. I have stocks, stock funds, Bonds and bond funds. I always make sure to have enough in my cash account to cover my withdrawals. I’m sure the others advice here is sound, and this is just what I do.2015-05-29 00:01, By: Scott, IP: [188.8.131.52]