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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: confused about early retirement and withdraw Date: 1/10/2004 11:56 PM
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Not if you use the life expectancy or "minimum method" for your SEPP.

After I posted, I figured someone would call me on that one.

Since the withdrawals increase (or decrease) with your year-end portfolio balance, it's very likely that they'll grow over time.

Well, I wouldn't say that they're "very likely" to grow. That depends on the underlying investments. As you said, a couple of Enrons or Worldcoms in a highly concentrated portfolio can make a bit of a mess. For the IRA balance to grow, the earnings would have to be greater than the SEPP distributions.

However, since the life expectancy tables end up in distributions from about 2.5% to 4% of the IRA balance under the minimum method, a reasonably diversified portfolio does stand a fair chance of returning more than the SEPP distributions over the long-term.

My annual SEPP withdrawal has been greater than my living expenses since 1997.

That just means that you managed to get a significant amount into your IRA during your working career. (And/or your living expenses are unusually low - or some combination of the two. Perhaps there were some 401k rollovers included in the IRA?) With the current limits on IRA contributions ($3000 growing to $5000 in a few years) I would imagine that someone trying to duplicate your success would need more than just IRA contributions to retire before 40. After maxing out 401k deferrals (or especially if there's no 401k available), the next logical choice IMHO would be taxable savings.

--Peter
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