Substantially Equal Periodic Payment - SEPP

[UhuruPeak]

Since we have been talking about expected rate of return & such lately, I figured I'd start looking way ahead and wonder how I'd ever be able to retire before 60 or 65 or whatever, assuming I had enough in retirement (tax deferred) savings such as IRAs. 

As it happens (and mentioned in passing a couple of times here), I've done pretty average on my taxable account but pretty good on my tax deferred so the only way I'd ever be able to retire early would be to dip in my tax deferred accounts... but I'd rather avoid the 10% penalty if possible, obviously :) I am based in the US obviously.

 

I just looked-up this SEPP thing, it looks like we can actually withdraw monies from an IRA before age 59 1/2 without the 10% extra penalty if done through a SEPP: 3 different methods, at least 5 years... has anyone on the board done this? ERICOPOLY?

 

Again - I am not close to having that problem in front of me, but hopeful to be faced with that question in the future. It also has implications of where I'd want to put new money saved between now and then.  And by the way... isn't IRA money off limits to lawsuits and gold diggers? that could be an added benefit.  I guess I'd really have to talk to an Attorney for that one though.

[Guest longinvestor]

I too have been actively considering the SEPP. I too do not have the need in front of me but it looks a darned good way forward. I've gone thru the SEPP calculators, expected age to live, starting balance etc etc.

 

Here is what it comes down to..the rate of return.

 

As many members on this board seem to expect 10-15% returns, this makes all the difference inthe world. We know the IRS allows the default rate only for the distributions, yet, as the balance balloons due to the widening delta between the actual rate of return and the IRS default rate, my model says it would be almost a mistake to not do a SEPP if you are planning to retire early. At least for me.

 

I too am interested in anyone else already doing this and any do's and don'ts.

[ERICOPOLY]

I just looked-up this SEPP thing, it looks like we can actually withdraw monies from an IRA before age 59 1/2 without the 10% extra penalty if done through a SEPP: 3 different methods, at least 5 years... has anyone on the board done this? ERICOPOLY?

 

I think my taxable accounts are enough to carry me the next 20 years (Plan A).

 

SEPP is my "Plan B", to be tapped as a last resort.  It's a good idea if you run out of taxable funds.