First year distrubtion from SEPP
I’m setting up my SEPP and want to take the first year distribution in four equal payments, Sep, Oct, Nov, Dec. The following years would be equal monthly payments totaling the same yearly distribution. The first years payments would be 25% of the yearly total and the rest would be 1/12 the yearly total, is this breaking the SEPP since all the payment will not be the same?
Thanks for any help, Andy
Permalink Submitted by Alan Spross on Tue, 2008-08-19 23:13
Andy,
This will not work and would bust the SEPP right off. If your first check is in Sept, then your options for 2008 are to take either the full annual distribution or 4/12 (33.33%) of the annual amount. However, you indicated that the first year would be 25% and that is not permissible.
The obvious fix would be to make all these installments the same over both years. You will then be taking the allowed 33.33% this year and 100% in the succesive years.
Permalink Submitted by Andy Brazelle on Tue, 2008-08-19 23:50
Thanks,
So if my annual amount is 36K, I can take it in one lump sum this year and set up monthly payments of 3K for the rest of the years.
Thanks again, Andy
Permalink Submitted by Alan Spross on Wed, 2008-08-20 00:10
Right. That is one of your options.
It does not matter what you schedule is this year in taking the 36,000. You could take a lump sum, take 9,000 each month for 4 months, or some other combination. However, the month you take your first distribution dictates your interest rate options, so if you want to lock in what you expect is the highest rate you can get, you must take your first distribution no later than the second month after the month the rate is published. For example, if you want to use the August rate you must take your first distribution in Sept or October, regardless of the amount of that distribution. However, the higher the rate you use, the higher your annual amount is.