Withdraw SEPP Distribution from a Cash Account Clarification
L1: Withdraw SEPP Distribution from a Cash Account ClarificationThanks for your time, this is a great site! I will be starting a new SEPP with the first distribution on 3-6-2017. I have a Traditional IRA in Vanguard with a balance $700K. I am 53 dob : 10/26/1963. I will be taking a yearly distribution of about 33K, here is my situation and question_ In the SEPP planning pointers, it recommends to withdraw the distribution from a cash account. This is what I plan to do. My Vanguard IRA currently is one account with eight fund entries. One fund entry will be CASH with 7 other fundÛ entries listing the stocks or mutual funds I will be investing in. For the first year, I will deposit 34K into the Cash FundÛ account to withdraw for March 2017. For the following years I will be using the proceeds of the 7 other fundÛ entries that will be deposited into the Cash fund. Every February I will make sure that the Cash FundÛ account will have the 33K available. If it is short, I will transfer funds from the other 7 other fundsÛ to the Cash FundÛ prior to the March yearly distribution. Is this correct?2017-02-23 23:49, By: k203206, IP: [22.214.171.124]
L2: Withdraw SEPP Distribution from a Cash Account ClarificationYes, you are on the right track. The planning pointer is intended to advise against the idea of making “in kind” distributions from your IRA. If you transfer shares of a mutual fund or stock to your taxable brokerage, you have no control over what the exact value of that distribution will be at the moment of distribution. Therefore, you should distribute cash and remove the valuation variable from the final 1099R.
That does not mean you have to keep a certain amount in cash all year. You can be fully invested but before each distribution you take you will have to redeem enough sharesso your cash settlementfund, a specific MM fund at Vanguard has enough cash to fund your 72t distribution.
Of course, for 2017 you have an option of distributing either the full annual calculation or 10/12 of it, pro rating due to the first distribution being in March.
2017-02-24 00:12, By: Alan S, IP: [126.96.36.199]
L3: Withdraw SEPP Distribution from a Cash Account ClarificationThanks Alan for your quick response and for clarifying my situation. Much appreciated!2017-02-24 00:29, By: K203206, IP: [188.8.131.52]
L4: Withdraw SEPP Distribution from a Cash Account ClarificationI suggest that you consider an approach similar to the one I recommend to older clients who have REQUIRED MINIMUM DISTRIBUTIONS (RMD’s).
I have them not reinvesting their dividends. This works great for them, and you, because most mutual funds, especially Vanguard, pay their Capital Gains Dividends in late December. That way you will probably have the cash for your distribution in Jan or Feb., unless the market has a bad year.2017-02-24 01:58, By: dlzallestaxes, IP: [184.108.40.206]