SEPP distribution period (followup to an earlier question)

[BlindDog09]

I'm just looking on input regarding the timing of the SEPP 72(t) distribution period, and when I can stop taking withdrawals.

• I am 57 1/2, so I know I must keep the SEPP schedule for 5 years (until I am 62 1/2)

My scenario / question:

• I have calculated the annual distribution amount to be $50,000
• Since I will be 59 1/2 in two years, I am going to these distributions in equal annual installments for the 5-year period, at which I will end the SEPP period, satisfying IRS rules
• I will take installment #1 for tax year 2023 on 12/1/23
• I will take installment #2 for tax year 2024 on 1/15/24
• I will take installment #3 for tax year 2025 on 1/15/25
• I will take installment #4 for tax year 2026 on 1/15/26
• I will take installment #5 for tax year 2027 on 1/15/27

These will all be 5 equal annual distributions in compliance with 72(t) - (I don't think the IRS cares when I take it during the year, as long as its the same total and I pay my tax!), but the 5-year anniversary of my initial payout won't be until the following year on 12/1/28.  My question:

"Do I still need to take a 2028 distribution, even though I will be >59 1/2 (62) by then?"   This would make 6 distributions.  But the way I read the rule, seems like I would still need to take that 2028 distribution because I'm still required to take it in the fifth year of the SEPP period which is 2028.  I think 6 installments are the result of me starting this process so late in 2023.

I know I can't add or withdraw more or less than the $50,000, but the timing has me confused.  I think if I do not take a 2028 distribution, the IRS would consider that failing to take the required distribution during the final year of the SEPP period.  I have asked several accountants and don't get a consistent answer. 

Thanks in advance.  I have been very thorough with tax planning, the calculations, the impact to my IRA value, and this is the right decision, just need a little help on the timing - many advisors, tax people, and planners just aren't familiar with this.

[tagteam]

@dmertz?

[akatimr]

I'm interest in the answer to this question too.

@tagteam  @MertZ 

I'm more specifically interested in whether annual distributions can occur anytime during the tax year and still constitute Substantial Equal Periodic Payments (SEPP)? Meaning, if I took my first annual distribution in Sept 2022, then can I take my second annual distribution in Jan. 20024 and it still counts as SEPP?

Thanks!

[DawnC]

Under the substantially equal periodic payment (SEPP) exception, the account owner must withdraw a substantially equal amount from an IRA annually for five years or until the taxpayer reaches age 59½. The amount that must be withdrawn is based on the taxpayer’s life expectancy.  You must take at least one per year for five years, or until you turn 59 ½.  If you miss even a single payment, you’ll owe the IRS early withdrawal penalties on all funds you’ve already taken out under your SEPP plan.

Three safe-harbor methods are available for calculating the annual withdrawal amount: (1) the required minimum distribution method, (2) the fixed amortization method, and (3) the fixed annuitization method. Each method produces a different annual withdrawal amount.  Notice 2022-6 lists three methods the taxpayer may use in determining payments under a SEPP.

Modification or termination of the SEPP before the end of the required time period results in a retroactive application of the 10% penalty to all previous withdrawals and interest charges from the date each withdrawal was received until the modification or termination occurred.

@akatimr