Amortization to RMD
Is there any time frame that you have to take the amortization before you can change to the RMD distribution.
- If you want to transfer the IRA to Vanguard now, I would first request the distribution of the remainder of your 2017 SEPP distribution under the amortization plan. Note that if 2017 is the first year of your plan you have the option of withdrawing either the full annual or a pro rated amount by the month. Pro rating would of course preserve IRA funds but also reduce your cash reserves in case the RMD method turns out to be too low at some point.
- Then do a direct transfer to Vanguard and Vanguard can help you with that. Be sure that it goes into a new IRA account, not an existing Vanguard IRA. Then do not take any distributions from the new IRA until 2018. I would not even tell Vanguard that you have a SEPP until 2018 after you figure your RMD distribution and set up the 2018 payments. I do not know how much support you will get such as checking your RMD calcs each year, so you will probably need to double check them yourself. You will also have to file a 5329 each year to claim the SEPP exception (exception code 02) since Vanguard will code your 1099R with Code 1 (early dist).
I just received Novembers distribution today on the 1st do I have to take Decembers or can I just move everything to Vanguard and start with the new RMD in January and skip Decembers payment or not, I do not need the money.
You have to complete the current year’s calculated distribution or you will bust the plan in 2017. While it is possible to simply take the December distribution from Vanguard before year end, it would be much simpler if you had only one 1099R form and Vanguard was not involved at all with your SEPP until 2018. Also, in the future do not set up your distribution around the 1st of the month as holidays or other year end errors could bust the plan with no time to make possible corrections. Try to set up anything automatic to make the distributions between the 5th and the 25th of the month.
Permalink Submitted by Alan - IRA critic on Tue, 2017-10-31 18:30
I assume this question addresses 72t plans. No, there is no time limit before making the one time switch to the RMD method, but I would definitely make the switch effective Jan 1 only, and not mid year. Your annual distribution will be reduced very roughly by 35%, so be sure that you will not be squeezed by this reduction. If a bear market ensues with a 40% drop, then your annual distribution will be reduced by 40% more (.6 X .65) with respect to the stock portion of your IRA. Every year you would update your age, use the latest 12/31 account value, and the same RMD table) and keep all copies of these annual re calculations.
Permalink Submitted by Scott Lojewski on Wed, 2017-11-01 13:45
Do you see any problem with me doing a transfer from one custodian to another now, or should I wait till the first week in December as I can have Vanguard (the new custodian) start my new RMD amount after Jan 1 of next year, IRA 1 I do have a years worth of funds saved just in case I run into any trouble. I made a mistake and am taking out too much money, I also am currently paying my financial advisory approximately $800.00 a month which I am going to stop when I transfer my IRAs,. Thank you for any information, I do keep all records.