SEPP can one spouse SEPP and the other not?

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Topic Author
SemiRetire
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Joined: Fri Dec 20, 2019 5:44 pm

SEPP can one spouse SEPP and the other not?

Post by SemiRetire » Tue Jan 14, 2020 3:42 pm

Substantially equal periodic payments.


Can one spouse SEPP their IRA/401ks and the other not?

We file jointly usually.

Thanks : )

livesoft
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Re: SEPP can one spouse SEPP and the other not?

Post by livesoft » Tue Jan 14, 2020 3:44 pm

Yes, that can happen.
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curmudgeon
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Re: SEPP can one spouse SEPP and the other not?

Post by curmudgeon » Tue Jan 14, 2020 4:29 pm

My understanding is that not only can spouses choose different options for this, but you can also split up your own IRAs (doing partial rollovers to multiple accounts) and choose whether to do SEPP on an account-by-account basis.

deikel
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Re: SEPP can one spouse SEPP and the other not?

Post by deikel » Tue Jan 14, 2020 5:02 pm

curmudgeon wrote:
Tue Jan 14, 2020 4:29 pm
My understanding is that not only can spouses choose different options for this, but you can also split up your own IRAs (doing partial rollovers to multiple accounts) and choose whether to do SEPP on an account-by-account basis.
+1

You can even choose the calculation method to do the SEPP to some degree so you can titrate the amount of money you draw from the account(s) to what you need.

Just be aware that a change in SEPP or a stop of the SEPP can be very tax painful
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

retiredjg
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Re: SEPP can one spouse SEPP and the other not?

Post by retiredjg » Tue Jan 14, 2020 5:21 pm

curmudgeon wrote:
Tue Jan 14, 2020 4:29 pm
My understanding is that not only can spouses choose different options for this, but you can also split up your own IRAs (doing partial rollovers to multiple accounts) and choose whether to do SEPP on an account-by-account basis.
In fact, this seems preferable to me. If you happen to bust the SEPP, the only thing at risk is what is in that one IRA. At least, that's what I think - I could be wrong.
Last edited by retiredjg on Wed Jan 15, 2020 9:03 am, edited 1 time in total.

Alan S.
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Re: SEPP can one spouse SEPP and the other not?

Post by Alan S. » Tue Jan 14, 2020 8:08 pm

retiredjg wrote:
Tue Jan 14, 2020 5:21 pm
curmudgeon wrote:
Tue Jan 14, 2020 4:29 pm
My understanding is that not only can spouses choose different options for this, but you can also split up your own IRAs (doing partial rollovers to multiple accounts) and choose whether to do SEPP on an account-by-account basis.
In fact, this seems preferable to me. If you happen to bust the SEPP, the only thing at risk is what is in that one IRA. At least, that's what I think - I could be wrong.
Partitioning your IRA accounts is done for 2 reasons:
1) To provide a second IRA outside the SEPP for emergency needs. This provides some insurance against having to bust the plan.
2) If your total IRA balance is large enough, partitioning them can produce an account with the balance needed to fund the SEPP distribution in the amount you need.

But if you bust the plan, the structure does not matter. The retroactive penalty and interest owed is calculated on the total amount of penalty waived back to Day 1 no matter how the accounts are set up.

retiredjg
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Re: SEPP can one spouse SEPP and the other not?

Post by retiredjg » Wed Jan 15, 2020 9:02 am

Thanks for the clarification, Alan. That makes sense.

Topic Author
SemiRetire
Posts: 14
Joined: Fri Dec 20, 2019 5:44 pm

Re: SEPP can one spouse SEPP and the other not?

Post by SemiRetire » Wed Jan 15, 2020 7:03 pm

Alan S. wrote:
Tue Jan 14, 2020 8:08 pm
retiredjg wrote:
Tue Jan 14, 2020 5:21 pm
curmudgeon wrote:
Tue Jan 14, 2020 4:29 pm
My understanding is that not only can spouses choose different options for this, but you can also split up your own IRAs (doing partial rollovers to multiple accounts) and choose whether to do SEPP on an account-by-account basis.
In fact, this seems preferable to me. If you happen to bust the SEPP, the only thing at risk is what is in that one IRA. At least, that's what I think - I could be wrong.
Partitioning your IRA accounts is done for 2 reasons:
1) To provide a second IRA outside the SEPP for emergency needs. This provides some insurance against having to bust the plan.
2) If your total IRA balance is large enough, partitioning them can produce an account with the balance needed to fund the SEPP distribution in the amount you need.

But if you bust the plan, the structure does not matter. The retroactive penalty and interest owed is calculated on the total amount of penalty waived back to Day 1 no matter how the accounts are set up.
How does one bust the plan?

Thanks

terran
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Re: SEPP can one spouse SEPP and the other not?

Post by terran » Thu Jan 16, 2020 11:21 am

SemiRetire wrote:
Wed Jan 15, 2020 7:03 pm
Alan S. wrote:
Tue Jan 14, 2020 8:08 pm
retiredjg wrote:
Tue Jan 14, 2020 5:21 pm
curmudgeon wrote:
Tue Jan 14, 2020 4:29 pm
My understanding is that not only can spouses choose different options for this, but you can also split up your own IRAs (doing partial rollovers to multiple accounts) and choose whether to do SEPP on an account-by-account basis.
In fact, this seems preferable to me. If you happen to bust the SEPP, the only thing at risk is what is in that one IRA. At least, that's what I think - I could be wrong.
Partitioning your IRA accounts is done for 2 reasons:
1) To provide a second IRA outside the SEPP for emergency needs. This provides some insurance against having to bust the plan.
2) If your total IRA balance is large enough, partitioning them can produce an account with the balance needed to fund the SEPP distribution in the amount you need.

But if you bust the plan, the structure does not matter. The retroactive penalty and interest owed is calculated on the total amount of penalty waived back to Day 1 no matter how the accounts are set up.
How does one bust the plan?

Thanks
By not taking the required SEPP at any time before you turn 59.5 or 5 years after you start the plan (whichever is later).

Topic Author
SemiRetire
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Joined: Fri Dec 20, 2019 5:44 pm

Re: SEPP can one spouse SEPP and the other not?

Post by SemiRetire » Thu Jan 16, 2020 1:51 pm

So really, I am 50 btw, the SEPP only has to run until I am 59.5 then I can quit taking SEPP payments with no penalty then?

Thanks

Alan S.
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Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: SEPP can one spouse SEPP and the other not?

Post by Alan S. » Thu Jan 16, 2020 2:25 pm

SemiRetire wrote:
Thu Jan 16, 2020 1:51 pm
So really, I am 50 btw, the SEPP only has to run until I am 59.5 then I can quit taking SEPP payments with no penalty then?

Thanks
Correct. Your plan ends on the day you reach 59.5, since that is the longer of 5 years or age 59.5.

Ways your plan can be busted:
1) Distribute an amount different from your calculation for a year. For your first year, you can pro rate by the month starting with the month of your first distribution if you wish.
2) IRS determines that your initial calculation was incorrect.
3) An amount is transferred into or out of the IRA account used for your plan to another retirement account outside your plan.

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