72t or withdrawal

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L1: 72t or withdrawal Hello,I was wondering if there is a maximum age for someone to use 72t. I read else where that it the later of 5 year or 59.5. The reason I am asking is because my dad, 63, has an variable annuity that is about $205k and he wants to use the money in the annuity and would like to receive about $15k per year. He is looking at different options and a financial advisor suggested that he should withdrawal $15k a year. He doesn’t want to use the annuitization method. Please help. Thanks and God bless,Danny 2008-12-04 21:01, By: dnaazn326, IP: []
L2: 72t or withdrawalHello, Danny:I’m no expert on annuities, so maybe Jim or someone else who is will chime in here. My thought is that the annuity contract will determine what can be withdrawn and when. You and your father should get the contract and read it thoroughly, particularly any parts that refer to withdrawals.That said, section 72 exemptions to the 10% early withdrawal tax of retirement funds pertains to those of us under age 59 1/2. Once we get to age 59 plus 6 months, we can usually take as much or as little as we want from our retirement plans. This assumes that no 72t plan was started prior to age 59 1/2.It’s usually only when someone already hasa 72t withdrawal plan in effect and they have not had it for 5 years that they have to continue it beyond age 59 1/2. I startedmy 72t plan at age 55 1/2,for example, so mustcontinue itfor5 years or until age 60 1/2is reached. I cannot stop this plan at age 59 1/2 sincethat would bust the plan. 72t plansmust last for the longer of5 years or until age 59 1/2 is reached.Ed2008-12-04 22:51, By: Ed_B, IP: []

L2: 72t or withdrawalNo method required since he is over 59.5. He can take a little, or as much, as desired without an IRS penalty. If he is merely taking withdrawals and not annuitizing, then the amounts can also be changed as needed. However, as Ed stated, read the contract as there may be surrender penalties imposed by the insurance company.If he annuitizes, then part of each payment would be a pro-rata share of gain and premium for tax purposes. If he is doing withdrawals, then any gain in the contract is assumed to be distributed first and would be taxable. Once the gain is distributed, then there would be a non-taxable distribution as a return of premiums paid.2008-12-05 02:21, By: Gfw, IP: []

L2: 72t or withdrawalGood morning Danny. If your father has a SEPP Plan distribution going now, then you need to be sure he satisfies the 5-years of distributions element. If he does not have one running now, then 72(t) is not a factor.There are two things you should look at: 1) What is the surrender charge timing for the contract and 2) What is the difference between the total premiums paid into the contract and the present contract value.The surrender charge schedule will be something between no-surrender charges and some percentage that runs up to maybe 10-years at the longest. Your financial advisor can determine this for you quite easily by looking at the current, quarterly statement. He may also call the insurance company and have the Customer Service Rep provide the information. Nobody will give you any hassle about getting this info. If the contract is still “in surrender,” then find out how much can be removed annually without penalty.Item 2: Like GFW stated (paraphrased), systematic withdrawals as opposed to true, “annuitized distributions” are subject to taxation on the funds withdrawn that exceed premiums paid in. In other words, earnings are assumed to be withdrawn first and then principal, when using the systematic withdrawal method, which you are planning on. However, if the premiums paid in are GREATER than present market value of the contract, then you have no earnings and your Fatheris withdrawing his premiuim dollarsand not earnings, so no taxes are due. If the contract has been in force for several years then I suspect the current stock market actions have reduced his contract value below his total premiums paid in or very close thereto. Again, your advisor can help you with this detail.Hope this helps.Jim2008-12-05 07:06, By: Jim, IP: []

L2: 72t or withdrawalThanks Everyone… I really appreciate it. Jim: my dad currently does not have SEPP distribution now. So from my understanding, 72t is best used when the annuitant is under 59.5. The contract is in force for 3 years and the original amount is $180k. I read somewhere that when you use 72t, the account value isn’t affected. http://www.inficad.com/~moneymanager/fixedira72t.htm I guess its talking about withdrawal is the same as growth rate. So because my dad is 63 so he would not need to use 72t since he won’t get the 10% penalty anyways and the withdrawal method would be most beneficial since the withdrawal amount can vary, is that correct? Thanks in advance guys!God bless,Danny2008-12-05 09:22, By: dnaazn326, IP: []