Distribution methods

L1: Distribution methodsI have an agent who has told me about the 72(t) ruling and I am considering using it to retire early. The method he is recomending is annuitization. According to what I understand I can annuitize for 5 years or age 59.5 whichever comes last.
What he is suggesting is thatI take a singlepremium annuity for the amount that I am eligible for under the excemption and then putting the remaining balance into a deferred equity index annutity for later use. I understand that this must be done over a 5 year minimum or until age 59.5.
I have not been able to understand this particular process he is saying will work and sites section 509 apendix b section 1.4 of the irs codes. Is this how one would use the annuitization method and stay within the IRS rules? If so how do I find the tables he is using for this calculation,I’m struggling to find data on this method.
Thank you
2003-08-14 15:11, By: Dave, IP: [127.0.0.1]

L2: Distribution methodsHello Dave:
How fast can you run (as in away from this agent). That being said, I will admit upfront that “I am mister anti-annuity” for a variety of reasons:
1. The commisions, loads and exit fees make an annuity a very questionable purchase; particularly inside of an IRA.
2. Why anyone would use the annuitization method to compute a 72(t)(2)(A)(iv) distribution is beyond me. Given the new ruling, it is the amortization method that is always the most beneficial to use.
3. The cite you mention in you post; 509 is obviously wrong; either he mis-cited or you wrote it down wrong. 509 has to do with UBIT — unrelated business income.
4. Just to clarify; using the annuitization method to compute a series of distributions under 72(t) has absolutely nothing to do with purchasing an annuity; one is a computation involving some slightly higher math; the later is an investmetn product; unforntunately they have very similar titles.
TheBadger
wjstecker@wispertel.net

2003-08-14 15:34, By: TheBadger, IP: [127.0.0.1]

L2: Distribution methodsHave to 100% agree with the Badger. Your statement…>>annuitize for 5 years or age 59.5 whichever comes lastis right and wrong. The distribution is calculated based on your life expectancy. The distributions, once started, must continue until the later of age 59.5 or 5 years. You don”t give your age, but you can use the calculators on this site to get a good idea of what the payment would be.
Spend some time learning – there is a lot of good information on this site -it could be the best time you spend – mistakes can be extremely expensive.

2003-08-14 16:00, By: Gfw, IP: [127.0.0.1]

L2: Distribution methodsThank you for your response to my question. To be a little more specific, I am 54 years old and have approximately $800,000 in qualified money. I would like to set up an immediate annuity to provide me with my income needs but don’t want to go over the amount exempt from the 10% penalty. The remaining balance I would like to defer in several other IRA’s for use after 59.5.
I believe that I must use the immediate annuity over a 5 year or until 59.5 whichever comes last, what I’m confused on is will by 72t be based on my entire IRA holdings and if so how do I determine what to deposit for the immediate. I don’t want to have the money grow at slower rate than I am withdrawing it and have to be hit with a penalty later. Are there tables from the IRS that would indicate the appropriate amount?
Once again thank you for your help
Dave2003-08-14 22:57, By: Dave, IP: [127.0.0.1]