Minimum age to begin a SEPP under 72t

L1: Minimum age to begin a SEPP under 72tI have an IRA that is made up of qualified money rolled over from previous employer 401(k) plans. If I wanted to begin a SEPP to transfer this money into something such as an indexed life insurance policy, is there a minimum age at which I must wait to begin this sort of a SEPP to avoid the additional 10% tax for early withdrawl? I do understand that once I would start a SEPP that it would have to continue until such time as I reach age 59 1/2.Thanks for any help you can provide. I am getting cross-eyed trying to read IRC 72 since I am not trained in reading this stuff.JT2007-12-19 20:46, By: JTav8r, IP: [69.254.238.71]
L2: Minimum age to begin a SEPP under 72tIf you were already 55 in the year in which you terminated from the employer with your 401-K, you may have made your 1st mistake by rolling it over to an IRA. (If you weren”t 55, or you employer wouldn”t permit you any option, then no harm done.)
Your 2nd mistake may be trying to understand SEPP 72-T without retaining the services of a tax professional who understands all aspects of this tax area.
Your 3rd mistake is not having bought the book featured on this website. (I have no connection with it.)
What do you mean by “beginning a SEPP to transfer money into an Indexed Life Insurance Policy” ? Do you mean to use your distributions to help pay the premiums of this policy outside of the SEPP 72-T ? or Do you plan for this policy to be an investment inside the SEPP 72-T ? If the latter, where will the cash flow come from within the SEPP 72-T for you to make the distributions during each calendar year from the SEPP 72-T ?2007-12-19 20:56, By: dlzallestaxes, IP: [141.152.248.162]

L2: Minimum age to begin a SEPP under 72tJT:
What is your age? My first guess is that you are somewhat younger than 55, and since you have already moved your K-plan assets into IRA”s, the “age 55 rule” is moot.
My second guess is that you are being solicited to purchase a life insurance policy and using a SEPP Plan to pay the premiums. If this is correct, please be careful and consider the dire consequences of using this methodology. Let”s suppose you are 35 years old. There is no minimum age to start a SEPP Plan, but you must continue withdrawals, uninterrupted, for a total of 5 years AND you reach actual age 59 1/2. So for a 35-year old the withdrawals will have to run for 24.5 years. That”s a long timeand will have ample opportunities for one ormore “disasters” to occur with your plan, resulting in back penalties and interest.
One last thought. Using home equity loans (HELOC”s) to fund investments is “STORNGLY FROWNED UPON”by securities regulators. Likewise, state insurance commissioners take a “very dim view” of using HELOC”sand 72(t) plans to fund life insurance purchases. Both of these funding methodsare fraught with potential for disasterous results when problems occur.For long-term plans you can expect some problems to occur. That is why the regulators take such an intense interest in this approach to investing or life insurance purchases.
Please consider carefully the actions you may be taking. Look for another way to fund your life insurance purchases.
Good luck.
Jim2007-12-20 08:28, By: Jim, IP: [24.252.195.14]

L2: Minimum age to begin a SEPP under 72tDLZ:
As to your last point, the life insurance policy would have to be “outside” of anything using 72(t). Since about 1986 (I believe), life insurance has been an illegal instrument to fund IRA”s and most if not all other tax favored plans. There may still be some cases in the deferred comp arena where it can be used but I think that has been cleaned up also.
Jim2007-12-20 08:39, By: Jim, IP: [24.252.195.14]

L2: Minimum age to begin a SEPP under 72tDLZ & Jim,Thanks for your input. Yes, I am age 45 at this time and I had some concerns about the “scenario” being pitched to me by someone. He was explaining that i could do a rollover of the IRA into an annuity and then make periodic 72t transfers from the annuity to fund a Indexed life policy that would let me take the income once i reach (his illustration) age 65 out tax free. I would have to pay the tax on the 72t withdrawals, but the the money could “grow” in the policy and I could make the withdrawals tax free throughout retirement. This is what led me to begin doing my own research into the IRC.The individual that has approached me about this is a licensed life insurance agent in my state, but i know he is not a “tax professional” and as I said above, I have some definite concerns about this plan.Your input has not given me cause to become any more comfortable with this “idea”.Thanks!JTav8r2007-12-20 12:02, By: JTav8r, IP: [216.84.176.82]

L2: Minimum age to begin a SEPP under 72tThanks for the additional information, which is pretty much what I was expecting. Let me add some comments to your responses.
Thanks for your input. Yes, I am age 45 at this time and I had some concerns about the “scenario” being pitched to me by someone. Good! You should be concerned.
He was explaining that i could do a rollover of the IRA into an annuity and then make periodic 72t transfers from the annuity … What”s wrong with making periodic distributions from your existing IRA to fund the new life policy? Oh I forgot. Unless you move to a new annuity, the agent doesn”t earn a commission. And since he”s only insurance licensed he can only sellfixed annuities which typically have long surrender periods and very large surrender charges. And if you presesnt IRA is in mutual funds, the insurance-only agent can”t help you set up distributions and other service work.
…to fund a Indexed life policy that would let me take the income once i reach (his illustration) age 65 out tax free.I would have to pay the tax on the 72t withdrawals, but the the money could “grow” in the policy and I could make the withdrawals tax free throughout retirement. Sorry, no free lunches. The money comes out of the policy in the form of “policy loans.” He did explain this aspect, didn”t he? This is what led me to begin doing my own research into the IRC.
The individual that has approached me about this is a licensed life insurance agent in my state, but i know he is not a “tax professional” and as I said above, I have some definite concerns about this plan.Good decision. My suggestion is for you to seek the assistance ofanindependent,Registered Investment Advisorto help you with your financial planning needs. He will have a relationship with the appropriate tax professional to help if you need a SEPP Plan in the future. If you need life insurance for the death benefit it affords, buy it with other funds. For now, keep working and pilling up your retirement funds in a sound plan.
Good luck.
Jim2007-12-20 12:37, By: Jim, IP: [24.252.195.14]