SEPP from IRA and Annuity
From what I have found, only one SEPP plan can be active at a time, however IRA account balances can be aggregated so that a larger 72T distribution can be taken. I have also found that SEPP can be taken from an annuity as a 72Q. My question is, can I aggregate the IRA and Annuity balance in order to take a larger SEPP and then take that distribution from either of the accounts? Or, since one is an IRA and one is an Annuity, can I set up a SEPP from each one separately?
I have found a lot of great info but nothing definitive on this. If it is out there in this forum already and I missed it I apologize. Thanks in advance for any help you can provide.
Derek
Permalink Submitted by Alan - IRA critic on Wed, 2022-06-01 19:42
The IRA and NQ annuity SEPPs could be executed separately, but could not interact in any way. Distributions and the plan calculations would be entirely separate. There is no limit to the number of plans that can be operated simultaneously, but you normally would not want a complex arrangement that would attract the attention of the IRS. On the other hand, if only IRAs are involved, more than one IRA can be part of the plan and the combined balance would be used to calculate the distribution, but the distribution would come from any of the accounts in any combination, but these are also complex plans and might be prone to execution error.
Permalink Submitted by Derek Shanaman on Thu, 2022-06-02 13:05
Thank you for the reply, I really appreciate it. So just to be clear, when I read that only one 72T plan can be set up, based on your statement I am now interpereting that as “one 72T plan per account”. So while maybe not advisable, we could set up a separate 72T plan for each IRA and Annuity account. Am I understanding this correctly? Thanks again for the help, this is a wonderful resource.
Permalink Submitted by Alan - IRA critic on Thu, 2022-06-02 14:13
You could, but I would certainly advise against it. Perhaps 2 separate plans at most, with the second plan typically some time after the first plan when it is obvious that the first plan will not produce a large enough distribution for most of the remaining term. Before starting the first plan, multiple IRA accounts can be partitioned by direct transfer to create an IRA with the balance needed to generate the needed distribution. The other non SEPP IRA can be used for emergency needs or perhaps to fund a second 72t plan later on if necessary.
Permalink Submitted by Derek Shanaman on Thu, 2022-06-02 14:24
Thanks you for your insight, it is greatly appreciated!
Permalink Submitted by Lawson Kitty Farm on Sat, 2022-06-04 08:17
SEPP, or Substantially Equal Periodic Payment, is a way of releasing funds from an IRA or other qualified retirement plans prior to reaching the age of 5912, which avoids IRS penalties. An individual who withdraws assets from a plan before reaching that age typically faces a 10% early withdrawal penalty on the amount distributed.
Permalink Submitted by Alan - IRA critic on Mon, 2022-06-06 15:55
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