72T Question on annuities

L1: 72T Question on annuitiesI have a friend who is57.He losthis job andhis new job leaves him short by $2,000 a month
he has$480,000 in a combination of IRA’s in annuities…which is within the calculators range to take $2000 a month at his age on a 72T..
My question….one annuity will all him to withdraw the $2000 a month from one of these annuities with $180,000 in it without penalty. But…musthe combine them to have these funds in one account or may Imaintain thetotal funds inseparate accounts and takehis $24000 a year..every year as required for the 5 years or until 62?…without the IRS getting upset.
Thank you.
John
2005-10-12 17:47, By: John, IP: [205.188.117.9]

L2: 72T Question on annuitiesJust like a SEPP IRA funded without annuities, you can consider all IRA accounts as needed to do the SEPP calculations and still leave the funds in separate IRA annuity contracts. Just remember that once they are considered as part of the SEPP, they will remain part of the SEPP until the SEPP terminates. Any withdrawals in addition to the scheduled annual amount will result in busting the plan. The insurance company will probably not give a code of 2′ on the 1099 so be prepared to file form 5329 to claim the exemption.
If your client has no cash reserves (other than the IRAs) also consider not using all the annuities (would mean a lower SEPP distribution) and keeping one of the annuities in reserve for emergencies.
2005-10-13 06:46, By: Gfw, IP: [127.0.0.1]

L2: 72T Question on annuitiesGood morning John. Gfw is absolutely correct with what you can do. His suggestion to keep one IRA out of the SEPP, or 72(t), universe for “emergencies” is also very good advise.
Let’s see if I understand your situation. IRA #1 with $180k is free of surrender charge and IRA # 2 with $300k has some amount of surrender charge to deal with. You need to run the numbers to confirm but I suspect the following arrangement will work best.
Set up IRA # 2 for SEPP distributions and use IRA # 1 to fill-in the shortage to make up the $2k per month, and for emergencies. Your client will have to pay the 10% penalty on distributions from IRA # 2, but this will only last till age 59 1/2 or 2 1/2 years at the most since he’s age 57. SEPP distributions from IRA # 1 should be small enough not to trigger a surrender charge, and maybe this problem will go away completely before the 5-years of SEPP is complete.
Be sure to do your own calculations to confirm the above scenario. You have all of the data, and the calculators on this site will give you the definitive answers.
Hope this helps.
Jim2005-10-13 08:25, By: Jim, IP: [70.184.1.35]