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72t Amortization not enough

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ByTim

L1: 72t Amortization not enoughI have a client that is 54 and wants $96,000/year from his rollover IRA.Amortization calc shows $61,000 as max. (Acct balance is $600,000)a. What can I do?b. Can we take out $96,000 and pay penalty only on 96-61=35?Thanks!2002-06-14 19:05, By: Tim, IP: [127.0.0.1]
L2: 72t Amortization not enoughHello Tim:Even using the annuity method requires an interest rate assumption of 17.5% to get to $96k per year based on $600k.If you think about it for a moment, withdrawing 1/6th of one’s principal each year is just a little outrageous.The only exception to this would be if your client is specifically designing some form of “stop gap” cash flow; e.g. something else of large signicance happens at age 60-62 and a withdrawal system is therefore being designed to simply fill an interim cash flow shortage. In this later case attempting to obtain a PLR might be a worthwhile endeavor; otherwise, I am relatively certain the asnwer is no.Lastly, in regards to your (b) question; also no; the penalty when imposed is imposed on the entire withdrawal.TheBadgerwjstecker@wispertel.net 2002-06-14 19:49, By: TheBadger, IP: [127.0.0.1]

L2: 72t Amortization not enoughBadger: Thanks.We are expecting a fairly large inheritance. Mom is 81……So it is a “stop-gap as you suggested the term. Maybe PLR is way to go.Any idea how long it takes to get PLR done?2002-06-14 20:18, By: Tim, IP: [127.0.0.1]

L2: 72t Amortization not enoughIn my opinion, attempting to get a PLR using a 17.5% interest rate is a waste of time, user fees and professional fees. Remember, the base purpose of 72(t) is to provide a Substantially Equal Series of Payments over the remaining life expentancy of the owner, or the joint life expectancy of the owner and his/her beneficiary. It’s retirement plan, not a stop-gap plan. While there have been PLRs issued with interest rates of 8% and even 9%, these rates can be tracked back to the going Federal Rates at the the time that the PLRs were initially issued, or a rate published by a Government agency like the PBGC.Just my thoughts.2002-06-15 05:50, By: Gfw, IP: [127.0.0.1]

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