72t calculations

L1: 72t calculationsI plan to start a 72t in January. I have 1 IRA account with an annuity of 200,000 and mutual funds of 260,000. My annuity will allow my to take up to 5% and I can take the 120% mid term that the federal government allows on the mutual fund balance. Should I have 2 seperate IRA’s to draw from, in this case or is it ok with the one. I’m hearing it’s ok, but I just would like to make sure.2005-12-16 15:48, By: minigirl, IP: [4.233.8.160]
L2: 72t calculationsHello minigirl:
I think you are confusing several issues. The IRS does not care how your IRA or IRAs are invested; nor does it care what rules/restrictions may be present on those investments.
Instead, the IRS would say; oh, minigirl has an IRA valued at $460,000, she is aged 55 in 2006 (an assumption); therefore her life expectancy is 29.6. The maximum allowable interest rate for January, 2006 is 5.43%. THEREFORE, the maximum annual distribution is $31,580.
Take $31,580 every year for the next 5 years and you are fine. Take any lesser but equal amount for the next 5 years and your fine. Take $31,581 or more per year and you will effectively disqualified your plan subjecting all distributions to the 10% penalty plus interest.
From which investments you take the cash is an investment management decision which is yours and yours only; not within the purview of the IRS.
TheBadger
wjstecker@wispertel.net
2005-12-17 09:23, By: TheBadger, IP: [66.250.23.21]

L2: 72t calculationsBadger, I’m confused about your sentence “Take any lesser but equal amount for the next 5 years and your fine”. Under the scenario you’ve set up I assume minigirl must take out $31,580 each year, no more, no less. Your sentence seems to imply she can take out less in some years if she chooses.Which is correct?
Michael2005-12-19 11:00, By: Michael, IP: [69.181.15.125]

L2: 72t calculationsMinigirl, when presumably adopting the amortization method; fixes three variables — IRA account balance, an age (usually inflexible) which leads to life expectancy AND an interest rate that may not exceed 120% of mid-term applicable federal rate for either of the two lonths preceeding the month in which the first distribution takes place. This lead to my hypothetical maximum of $31,000 or so.
Minigirl can alter two of these variables: she can alter the account balance easily by splitting off part of one of the IRAs into another IRA and use (or commit) a lesser principal amount to the SEPP plan & this would necessarily reduce the annual distribution. Or, she could adopt any interest rate assumption (right down to zero) less than the maximum allowed. This also would compute to an annual distribution of a lesser amount.
TheBadger
wjstecker@wispertel.net
2005-12-19 16:36, By: TheBadger, IP: [66.250.23.21]