72t

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L1: 72tstill getting some conflicting information about 72t calc.

can I use the total IRA funds for calc purposes, and take the entire 72t distibution from only one IRA source:
example: total funds $600000
one ira annuity for $300,000
one mutual fund account for $300,000
based on the amortization method, distribution comes to $37000 per year, can this payment come from the annuity alone, which had an initial deposit of $300,000, so the annuity is depleted by the end of the 72t distribution period.
thanks
I havve been told this cannot be done by the annuity company and the IRS
2007-07-12 11:12, By: nancy, IP: [159.53.46.143]

L2: 72tNancy:
I will leave the meat of your question to those way more qualified than I to answer it. I do have a question, though. Why would anyone put an annuity in an IRA? Other than raise the amount lost to fees and create a bunch of rules on what you can do with your money and when, what does this accomplish? Just curious.
I bring this up because my wife once had a 403b account that HAD to be invested in an insurance company annuity… per the school district policy. When I questioned them on this, they said that this was the only investment possible under the law. Apparently, the law change in 1974 had not reached them by 1986 as they had no clue as to what a 403b7 account was all about. In any case, the performance of this 403b plan was mediocre at best, the rules about money transfer were rigid,it had a 7 year declining surrender charge, andit hadfees in excess of 2% per year.
Ed2007-07-12 21:12, By: Ed_B, IP: [67.170.159.37]

L2: 72tGood morning Nancy:
The answer to your question is “yes” as far as the IRS is concerned, but it depends on how the custodian(s) interpret Rev Rulling 2002-62 as to how “distribution friendly” they will be for you. This is essentially my previous answer toyourfirst posts on this subject. By the way, instead of starting a new post to your questions it will be cleaner if you will simply add a reply to your original post. That way everyone will have continuity of the discussion. I”m surprised GFW hasn”t rearranged things already.
How you invest your money is dependent upon what you are trying to accomplish. Variable annuities today have evolved drastically from the days Ed”s wife was in the 403(b) VA. Today you can get a VA with surrenderperiods ranging from zero time… that”s right; putyour moneyin today and take it out tomorrow … to3-year, 4-year, 7-yearbut rarely longer, and surrender charges ranging from zero (0) percent and up.The problem of”poor performance” in the 403(b) situation described by Ed isreal, but it is notan inherrantfault of the VA, rather it”s a problem of how the money is invested.I have interviewed a lot of 403(b) participants andthe vast majorityof themhad simply put their money in the money market account or a bond fund because theywere “afraid of the market,” and thishas goneon for 20 to 40 years. It”s sad that rarely does the agent who sold theteacher ever review what”s going on with the plan. They never find out what”s new in the life of the teacher or even suggest making changes in the investment options. There”s no way to say if this happened in Ed”s wife”s case, but poor performance in a 403(b) plan can be easily traced to this type situation.
Why would you use a VA for an IRA investment? That depends on what benefits do you want to build into your plan. The biggie is the death benefit which usually locks into the highest contract anniversary value. If the market tanks and your die, your beneficiary gets the higher of the death benefit or the market value of the contract. After the market crashed in 2000, I had 4 clients bail out on me … they died … and left their widows with an IRA that paid out the death benefit which was significantly greater than the contract market value. You decide if the annuity was a good deal for these widows.
Another recent development in VA”s is the “living benefit” which can provide a stream of income, similar to an immediate annuity income stream. It”s not the same but in most cases it”s better. Make your advisor show this to you. It”s called a “Guaranteed Minimum Withdrawal Benefit” (GMWB).
As to costs, yes, the total cost for a VA may be greater than a no-load mutual fund. But then you are trying to compare apples to alligators. There is no comparison. You are paying for the extra benefits offered by the annuity that you can”t get with a mutual fund. By the way, don”t let someone sell you on the idea that annuities “charge more for tax deferral than mutual funds.” This is a blatant lie that TV & radio pundants hype to blast the annuity. Nowhere in the prospectus of either a mutual fund or annuity will you find a charge for “tax deferral.” Congress simply passed legislation thatallowstax deferred growth withinIRA”s and “insurance products,” which includes annuities. If Congress provides the benefitof tax deferred growth for one group then they usually provide the same benefit for all. (I”m hedging here a bit because who knows what mischief Congress could create in the future.) So use whatever investment vehicles you wish to best accomplish your mission.
No, I don”t recommend VA”s in all cases, but I”m not closed-minded to completely discount them. It depends on the individual situation.
Jim2007-07-13 09:28, By: Jim, IP: [24.252.195.14]