The calculators default values are set to values that would be acceptable under Revenue Ruling 2002-62. However, be sure to verify the interest rate using the link in the menu on the left. Also remember that there is more to a SEPP plan than calculating the annual distribution. Check out our Planning Pointers for pointers on establishing your SEPP plan.
Owner Born: Enter the IRA owner's date of birth as MM/DD/YYYY.
Beneficiary Born: Enter the beneficiary's date of birth. This entry is only used if Joint calculations is selected below. Do not try to leave this as a blank entry.
SEPP Method: Select from one of the three acceptable distribution methods.
Total IRA: Enter the total balance all of your IRA account(s). This entry is used only for illustrative purposes.
Amount to SEPP Plan: Enter the amount in the total IRA account(s) that will be used in the SEPP plan. When you decide what IRA account to allocate to the SEPP plan, then all the funds in that account must be used to determine the annual distribution from the SEPP.
1st Payment Date: Enter the estimated date when the 1st distribution/Payment will be made. This is the effective date of the plan. It is also the date used to determine the maximum interest rate.
SEPP Interest Rate: Enter an interest rate based on the date the 1st payment is made for methods number two and three. Maximum Rate - For any SEPP plan the interest rate that may be used is any interest rate that is not more than 120 percent of the federal mid-term rate for either of the two months immediately preceding the month in which the distribution begins.
Investment Rate: The average interest rate that will be achieved while the plan exists. Used only for illustrative purposes.
IRS Penalty Interest Rate: The interest rate charged by the IRS on past due income taxes and tax penalties. Used only for illustrative purposes.
Note: Unless you select 'Yes' for the "Use Joint Calculations" or "Use Uniform Table" options, calculations will be based on single life expectancy which is the most common calculation used.
Use Joint Calculations: Select either YES or NO to use joint life expectancy calculations. Joint calculations are seldom useful as they will always generate a lower annual distribution. If this entry is selected, the next entry may not be selected.
Use Uniform Table: Select either YES or NO to use the Uniform Table for the calculations. Using this entry will automatically base the calculations on a beneficiary age 10 years less than the owner's age. Calculations based on the Uniform Table are seldom useful as they will always generate a lower annual distribution. If this entry is selected, the previous entry may not be selected.
Pro-Rate 1st Year Distribution: Select this option to calculate the initial distribution as a pro-rated distribution based on the SEPP starting date
If distributions are based on a 5-Year SEPP plan (age 55 or above when the plan starts), final distributions will also be illustrated as a pro-rata distribution.
COST to BUST: The Cost to Bust is equal to the the penalty due for the current year, all previous plan years, plus interest due.
For example, Based on a payment of $9,001.71 and an IRS Interest Rate of 9%, Year 2 would be calculated as follows:
Year 2=(9001.71*.10) = 900.17
Total Tax & Penalty Due: =1881.36
Planning Pointer: If the single life calculations produce a higher than desired payment, consider breaking the single account into multiple accounts using only one of the accounts to produce the desired SEPP payment.
Other accounts can be used for emergencies or for establishing another SEPP at a later date.