SEPP
I have begun a sepp program on my ira. I started it in 2015 and in two days i will be 59.5. I would like to withdrawal more than the sepp program provides but was told i can not. Can i discontinue the program and pay the penaltys now so I can take out more next year thus avoiding higher penalitys in the future for taking more than sepp provided?
Permalink Submitted by Alan - IRA critic on Fri, 2017-07-14 20:03
You will not incur a greater retroactive penalty by busting the SEPP later compared to now because there is no penalty on distributions you take after 59.5. However, you will incur a somewhat higher late interest charge by paying the penalty later than you could have. To be clear, you will bust the plan by taking out more than your calculated amount prior to 5 years from the date of your first SEPP distribution, however the penalty owed will only apply to distributions you took up through two days from now when you reach 59.5. Also, you can take a distribution from your IRA anytime you want, so when you were told you cannot they meant simply that if you did it would bust your SEPP plan. The IRS may or may not bill you the late interest for paying the retroactive penalty late.