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 AFR rate, it has been often recommended in our knowledge base that you should create a separate IRA account and set aside exactly what you need for your SEPP plan.
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 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 AFR, 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 AFR. 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 AFR you expect to use, and the distribution factor based on your current age from the life expectancy table you selected (e.g. single life, joint life, uniform).
The life expectancy tables are in the current year’s version of IRS Publication 590-b, a link to which can be found in the 72tNET.com IRS Publications and Forms page.