Minimum Balance Calculator
When developing your SEPP distribution plan, use 72tNET.com’s exclusive Minimum Balance calculator to find the initial balance you should have in your SEPP retirement account(s) so you can withdraw the exact annual distribution amount you need.
If your retirement account balance is very large (congratulations!), your SEPP annual distribution will be larger than your needs. Rather than take distributions that are too large, or reduce your distributions by using a lower interest rate, it has been often recommended in our forum (refer to the Q&As) that you should create a separate IRA account that contains exactly what you need for your SEPP plan.
That way, if a financial emergency ever arises, you can use the non-SEPP IRA account(s) for those needs. You will be charged the 10% penalty, but just on the emergency distribution – your SEPP plan will be safe. Or, if you find you need more income in the future, you can use one of the other non-SEPP retirement accounts to set up a second SEPP plan.
Example: John has $3 million in all of his retirement accounts and needs $75,000 per year in distributions to pay for living expenses. Based on his age and interest rate, the maximum he can withdraw according to the 72tNET SEPP Distribution Calculator is $135,460.26. That’s more than he needs so John decides to carve out some of the $3 million into a separate IRA that is designated just for the SEPP Plan. But how much should he transfer over? Well, John uses the Minimum Balance Calculator to find out that the new IRA should have a balance of $1,661,004. This is exactly the balance he needs for an annual distribution of $75,000 at his age and interest rate. But don’t just trust John’s word: try it for yourself!
INSTRUCTIONS: In the top section of the form, enter the annual distribution amount you plan to withdraw from all accounts, along with the interest rate you expect to use, and the distribution factor based on your current age from the life expectancy table you selected (e.g. single, joint, or uniform). Make sure to account for taxes, since the withdrawals will be taxable income under federal rates (and possibly state and local).
The life expectancy tables were updated in November 2020. Refer to the new 2022 Life Expectancy Tables (starting on page 72472).