72t investment

L1: 72t investmentI am a 49 year old single femalewho will begin a 72t next month. I have approx. $1m in qualified money. I would like approximately 20k in before tax income. My birthday is 12-3-1957.
What would I need to 72t to get the 20k? My advisor has recommended treasuries, a fixed indexedannuity (it does allow up to 10% of value to be withdrawn per year starting in the first year–I think it is”Great American”), and a conservative portfolio of index based ETFs and bonds among the possible places to place the 72t monies.
Is the annuity a good idea? My concern about the managed conservative portfolio is that it could go down in value.
Also, what would the amount I would need to invest be?
I like my advisor–he is fee based–and he has done very well for me over the last 12 years. I like to stay sharp however and ask him good questions. Any and all help would be appreciated.
2007-02-15 19:00, By: Tiger, IP: [66.140.62.234]

L2: 72t investmentGood morning Tiger:
I”m glad you have a good, long-termadvisor withwhom you are satisfied. But I”m not sure of the investment idea you have described, and I”m sure we”re not getting the complete picture from the limited information you have provided. Anyway, let give some thoughts.
I ran the reverse calculator on this site and came up with $306.6 k to fund $20K annual distribution. That”s pretty straight forward and I would encourage you to play around with the calculators on this site to get a feel for how SEPP operates. Since you don”t need the full $1mil to generate the $20K, then split the remainder into a separate IRA account for emergencies or to start another 72(t) if the need arises.
I don”t like the idea of using EIA /FIAannuities, and the one you mention has a very long and very large surrender charge. That is a commission product so what”s a fee advisor recommending that type product? Also, over the long term you will need growth so why the recommendation for what appears to be a “fixed” investment plan?
Just some thoughts.
Jim2007-02-16 06:46, By: Jim, IP: [24.252.195.14]

L2: 72t investmentHello Tiger:
I will admit right up front that I am mister anti-annuity simply becuase there are so many costs associated with an annuity that you; because of the size of your asset base can skip / avoid. Over the past 25 years or so, the sole job of your qualified money was to grow, grow and grow some more. Now, you are adding a new objective — give me $20k per year in cash. Different objectives dictate different investment philosphies. I would suggest:
1. Open IRA #1 with $310k (as suggested by Jim). Buy zero coupon treasuries (Zeros) building a 10 year ladder — cost of approximately $160,000. As each traunch of zeros matures it becomes the cash to distribute to you. Invest the remaining $150,000 for growth which compounding at 6% will grow to apprixinately $270k. Thus at the end of 10 years this account will have lost $30k or so or may be equal in size if the growth returns are a little better. What you have done here is “self-created” a 10 year single premium immediate annuity for yourself and have bypassed the insurance company to do so.
2. Open IRA #2 with $690k and invest in an income and growth balance up to your risk tolerance. It is this money that you will need mostly likely starting in year 11 when you are sixty.
TheBadger
wjstecker@wispertel.net

2007-02-16 07:27, By: TheBadger, IP: [72.42.66.13]

L2: 72t investment
Hello, Tiger:
Jim and Badger have given you some excellent advice. An additional thought occurs to me in that the 2nd and larger IRA could be invested at a low cost mutual fund, such as Vanguard or T. Rowe Price, in one of their life-cycle funds. Most fund families have these available and you can choose your preferred aggressive / moderate / cautious investing style by picking an appropriate “retirement date”. Just look at the life-style funds available from these discount fund families and see what investments they hold. Aggresive funds will have a laterretirement date while less aggressive funds will have an earlierretirement date. You can also check the stocks they hold to see if they prefer big caps or smaller caps with the big caps usually more conservative but slower growing. Higher bond amounts are also more conservative. Congrats on your aggresive saving style and the amount of cash that you have saved. This bodes well for a long and comfy retirement.
Regards,
Ed
2007-02-17 16:36, By: Ed, IP: [67.170.159.37]

L2: 72t investmentBadger,Could you please give an example of how to ladder zeros for 10 years using Tigers figures?willi2007-03-15 06:43, By: mandowilli, IP: [158.147.53.149]