• Question
  • Are partital 401k distritubtions the same as SEPPs?

    Asked by a 57 year old woman from Chippewa Falls, WI on 12/28/2017

    I am soon to be 56 years old and expect that my job position within the company that I work for will be eliminated within the next couple of months. I am researching to determine if early retirement is an option. I have contacted my 401k plan administrator to find that they do not provide SEPPs. They do allow for partial distributions from the 401k plan. Will requesting yearly partial distributions from the 401k plan be considered valid SEPPs if the amount follows one of the SEPP withdrawal amount rules for early withdrawal after 55 and continue for 5 years? Also, most (but not all) of the 401k amount is available for partial withdrawals, would the SEPP calculated amount be based only on the amount available for partial withdrawals (rollover from previous company 401k) or on the entire value 401k amount?

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  • Categories: Taxes, Retirement Planning

Answers

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  • Hi,

    Great question - a few thoughts:

    1) You should explore if you can do an in service 401K rollover to an IRA that allows SEPPs (Substantially Equal Periodic Payments). You may also want to fold in previous 401Ks into that accounts so that you have more control over your money.

    2) It appears that SEPPs need to be amortized across your full life expectancy vs. 5 years
    https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-substantially-equal-periodic-payments

    3) It's probably worth talking with a Retirement and Tax expert about this strategy and others that may help you figure out an early retirement - you can request a free consultation on our site by clicking "Get Exert Help" on this page: https://www.newretirement.com/retirement-calculator/retirement-planning-options.aspx

    Note - it's faster if you create your own retirement plan on our site first (which you can start from the same page - just click "Go to Planner"

  • Login to rate this answer:   Answered on 3/5/2018
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.