72T then withdrawl for annuity

You are here:
< Back

L1: 72T then withdrawl for annuityIf I start a 72T withdrawl (pre 55) amortization program on 500,000 at age 51, then at age 56 I find that there is an annuity I want to buy with the same 401k money, can I continue the predetermined withdrawls per the 72T, making sure that there is enough money remaining in the 401k to cover the remaining mandatory payments on the 72, and utilize the remainder to buy the annuity, OR must I bust the plan and start over?
what about if I start the 72T as above (amoritization) change to a life expectancy withdrawl then start the annuity?or start as above with the 72T, then annuity, then when I convert the amoritization portion that remains to a straight life expectancy withdrawl, which $dollar amount do I use to convert the original 401k number, the remaining funds after the annuity removed?
thanks2008-07-02 15:10, By: jay, IP: [207.200.116.135]

L2: 72T then withdrawl for annuityYou probably mean IRA, not 401k, right?
You could do the partial transfer into an annuity IRA, but first consider the possible issues raised by PLR 2007 20023, which has yet to be adequately explained. The PLR is probably an aberration, but you should at least consider the small risk remaining for doing a partial transfer.
Beyond that you can do as you requested without busting the plan. You can also do the one time switch before doing the transfer, but then you will have to consider the year end balance for both of the accounts each year since the switch to RMD involves the total plan, not just the remainder of the original account. Finally, just to be sure, you should not be considering annuitization of the annuity until after the 72t term has ended.
You could make the one time switch either before or after doing the partial transfer. Finally, note that creating more moving parts to your plan increases the chance the IRS might inquire and/or that you would make an executory error along the way that would bust the plan.2008-07-02 16:28, By: Alan S., IP: [24.116.165.60]

L2: 72T then withdrawl for annuityI”m confused as to your reasoning to purchase an annuity in the middle of your SEPP Plan distributions.
Do you mean to purchase an “immediate annuity” and begin “annuity distributions” at age 56? Or do you plan to purchase a “deferred annuity” for investment reasons and future withdrawals?Your answerwill definitely impactany answers we may offer.
Jim2008-07-02 17:59, By: Jim, IP: [70.167.81.119]

L2: 72T then withdrawl for annuityre: your question: it would be an immediate annuity.
thanks2008-07-02 21:32, By: jay, IP: [207.200.116.135]

L2: 72T then withdrawl for annuityFirst, I can”t understand why anyone would want to puchase an immediate annuity at age 56. With that said, if you really want to use an immediate annuity, start by making sure that your IRA used for the SEPP is of a “custodial” varierty – one that is capable of holding and owning multiple investments. If you decide to purchase an annuity at age 56, have the account purchase the annuity as another investment and have the immediate annuity paymentspaid directly to the IRA account and continueSEPP distributions until the end of the plan – to age 59.5.2008-07-03 02:17, By: Gfw, IP: [98.214.67.158]

L2: 72T then withdrawl for annuitygfw has provided the outline for annuitizing part of the SEPP and we both agree that decision is questionable, especially with today”s relatively low interest rates. That means the monthly payouts are locked into lower amounts for good.
However, getting back to the original post, it appears in the second paragraph that you were also contemplating a one time switch from amortization to the RMD method. If you annuitize, better forget the one time switch to RMD because there will no longer be an account balance for the portion that has been annuitized, and that would bust the SEPP because you would need a new complete account balance every 12/31 until the SEPP reaches the modification date.2008-07-03 10:51, By: Alan S., IP: [24.116.165.60]

L2: 72T then withdrawl for annuityJay:
Twoquestions. In your original post you described an investmentdesign for a SEPP Plan. Did you create the design yourself based on your own research, or was it suggested to you by someone in the financial servicesindustry?
Are you in the financial services industry?
Jim2008-07-07 07:05, By: Jim, IP: [70.167.81.119]

L2: 72T then withdrawl for annuityJim,
I am not in the financial services industry. I was trying to ascertain that if interest ratesincrease in the next 5 years, would it be possible to start a 72t now, and then take advantage of increased ratesand annuitize the remainder in a fixed annuity without busting the 72t. Obviously if rates do not increase I would not take that route, but I wanted to fully understand any options available (including reducing the 72t to a straight life expectancy in case the funds were reduced after the anuitization occurred)
Jay2008-07-07 09:45, By: jay, IP: [205.188.116.131]

L2: 72T then withdrawl for annuityJim,
I am not in the financial services industry. I was trying to ascertain that if interest ratesincrease in the next 5 years, would it be possible to start a 72t now, and then take advantage of increased ratesand annuitize the remainder in a fixed annuity without busting the 72t. Obviously if rates do not increase I would not take that route, but I wanted to fully understand any options available (including reducing the 72t to a straight life expectancy in case the funds were reduced after the anuitization occurred)
Jay2008-07-07 09:45, By: jay, IP: [205.188.116.131]