Phil Martini wrote:
- quote -

SEPP is a strategy to withdraw IRA funds and avoid the 10% penalty. My
strategy has the exact same result, except it avoids the 'withdrawal
till 59.5' requirement.
BTW, the topic was not even SEPP, but penalty free withdrawal based on
job loss, which of course isn't part of the regs. No idea where the
pancakes came into this, but no eggs or milk, and you'd have matzoh,
which is right for this time of year. But I'm sure you knew that.
Joe

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"joetaxpayer" wrote:

- quote -

In a pinch you can make pancakes without milk and eggs. What does either
have to do with SEPPs, which were the topic of discussion?

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Phil Marti wrote:
- quote -

Right, Phil. But from my "Neat IRA tricks" collection comes this:
If your income is below the threshold for Roth conversion (I know, this
will not apply to the $10M man above, now, but it will in 2010) you can
convert money now and each year, so that in five years time you may take
withdrawals, and now have them subject to any penalty. And by converting
each year (from IRA to Roth IRA) to replace those withdrawn Roth funds,
you can withdraw any amount you like, up to the total that's aged five
years.
Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Seth" wrote:

- quote -

Because Congress is the Mommy, and Congress says so. A SEPP must be based
on life expectancy. See IRS Publication 590.

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Seth wrote:
- quote -

It's under rules for the exception that "Distributions made as part of a
series of substantially equal periodic payments over the life expectancy
of the owner or life expectancies of the owner and the beneficiary."

The requirement is that the withdrawal be in the form of an annuity in
shorthand-speak. You must use an IRS-approved distribution method and
you must take at least one distribution annually for this exception to
apply. The “required minimum distribution method,” when used for this
purpose, results in the exact amount required to be distributed, not the
minimum amount.

It is based on the actuarial tables to disburse the entire account
starting balance over the lifetime of the annuitant and beneficiary if
any; hence the amount to be taken out is not of your choice but based on
age and initial value. At a fixed age, got get more annually you have
to start w/ a bigger pie, but that may deplete the account before
desirable if are too young.

The early distribution is a limited-size loophole.

It's described in Pub 590 and references...

--

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <fug258$5a6$1[at]aioe.org> , dpb <none[at]non.net> wrote:

- quote -

I don't understand. Why can't someone with a $10 million IRA withdraw
$50,000/year as a SEPP?

Seth

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com wrote:
- quote -

No, it doesn't give you complete freedom; it simply allows you to not
excessively draw down a total amount early by making a smaller
distribution than otherwise required if the entire assets are in one
account.

The other rules are still in place of "substantially equal" and the
greater of the time until 59.5 or five years so you can't necessarily
solve the short term need ideally. But then, I didn't claim that...

--

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Apr 20, 12:07*pm, dpb <n...[at]non.net> wrote:

- quote -

So you calculate the SEPP only on one or more IRA accounts of your
choosing? But that still might not work. Say you had 250k in your
IRAs and wanted 5k for hardship reasons just for the near future, say
6 months. If you rollover 5k into a new IRA and take SEPP's from it,
then you have to do it for 5 years or age 59.5. Assuming your age is
39.5, that is 20 years; with a monthly payment of around 5000/20/12 =
$20.83. Actually, my formula is not right because I have to use
either the amortization method, annuitization method, or required
minimum distribution (RMD) method, but I have no idea where to find
those formula. In any case, the monthly payment will be too small.
If you increase the amount in your IRA from which you will do the
SEPP, you'd be eating up your retirement money till age 59.5. Is
there a way around this? It seems that you could make the interest
rate super high, but page 4 of http://www.irs.gov/pub/irs-drop/rr-02-62.pdf
seems to prohibit this.

Anyway, good financial advice is to have 6 months living expenses in
cash reserves.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote
- quote -

I have seen three other non-trivial factual mistakes in the
last two months in financial planning columns. I suppose
these columns do more good than bad. Still, I would trust a
well-cited majority answer at internet fora like this before
I trusted a questionable statement in a newspaper column. My
experience with early withdrawals, and double checking with
Pub 590, shows Joe and the others here are correct, and the
ChiTrib statement is wrong.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com wrote:
- quote -

The "trick" is that one can distribute a sizable IRA into multiple
accounts so the SEPP amount can be calculated over an initial value of a
chosen size to limit the collateral damage, so to speak.

--

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

sbernelli[at]hotmail.com wrote:
- quote -

No matter how bright one may be, mistakes are made. This seems to be
one. This was one I happened to be sure of. But it was easy enough for
Gail to check her facts, the Pub 590 Phil references. I went to your
link and saw a note on the paper's web site, and added my own.
Joe

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Apr 20, 9:23*am, sberne...[at]hotmail.com wrote:
- quote -

Thank you for the responses. It sounded too good to be true. My
acquaintance's source for her statement was Gail MarksJarvis' column
in today's Chicago Tribune. In her answer to a reader's question
about what to do, financially, when facing a job loss, she says: "You
have another issue to face. If you remove money from your IRA and
401(k) now, Uncle Sam will punish you with taxes and perhaps a
penalty. In some situations, such as a job loss, penalties on IRAs can
be waived, but taxes aren't." Here is the link to the column if you
want to see it: http://www.chicagotribune.com/busine...6007765.column

Sara

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Apr 20, 7:23 am, sberne...[at]hotmail.com wrote:

- quote -

See

http://www.investopedia.com/articles.../02/111202.asp

To pay for medical Insurance might apply, but only after you receive
unemployment for 12 weeks.

To pay for un-reimbursed medical expense over 7.5% of AGI might apply,
but that's even if you're employed.

Finally, substantially equal periodic payments. You have to do it for
5 years though, so it eats up your retirement savings. Follow the
link in the above webpage titled " Rules Regarding Substantially Equal
Periodic Payment". The example there shows that on a 500k balance and
age of 45, the annual payment would roughly be 12500 or 25000
depending on the method you choose to use.

Good luck.

========================================= MODERATOR'S COMMENT:
The SEPP requires five years AND until you reach age 59.5

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<sbernelli[at]hotmail.com> wrote:

- quote -

She's wrong if she thinks that's all it takes. For a complete description
of the penalty exceptions see the discussion beginning on page 53 of IRS
Publication 590. Don't forget to keep reading through all the "ifs, ands
and buts."

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

sbernelli[at]hotmail.com wrote:

- quote -

There are a number of exceptions, you are correct there. She may have
read that job loss due to permanent disability is one such exception,
and forgot to mention the disability part to you.
There was a Katrina (as in the hurricane) exception as well, but that
has come and gone.

Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

It was my understanding that an early distribution from an IRA was not
only taxable as income but also, with a few exceptions, subject to an
additional 10% tax. Now an acquaintance tells me she read somewhere
that an early distribution precipitated by job loss would not require
an additional 10% tax. I cannot confirm this in any of the tax books I
researched. Is this acquaintance correct? Thanks.

Sara

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >