Annuitizing a portion of a direct rollover.

L1: Annuitizing a portion of a direct rollover.If a retiree completes a direct rollover prior to age 59 1/2 and would like to receive more than the amount available through 72(t), can the retireesplit their IRAand purchase an immediate annuity with oneIRA without incurring the rath of the IRS?2003-02-06 11:39, By: Marsh, IP: [127.0.0.1]
L2: Annuitizing a portion of a direct rollover.Can an IRA be split into multiple accounts… Yes.Can the SEPP plan be based on only one of the accounts… Yes.
>>and purchase an immediate annuity with oneIRA without incurring the rath of the IRS? Answer is yes, provided the annuity meet the provisions of Rev. Rul. 2002-62! Since most annuity contracts are not based on the Annuity 2003 mortality table, you definately want to find one that is and that will use an interest assumption as outlined in 2002-62the first annuity payment is made.
2003-02-06 12:03, By: Gfw, IP: [127.0.0.1]

L2: Annuitizing a portion of a direct rollover.GFW,
I do not want to use the SEPP/ 72(t). I want to give part of my Lump sum to an insurance company and receive a stream of annuitized money. I will no longer own the rights to the money I give the Insurance company. I just want a temporary stream of money.
Can this be done?2003-02-06 12:27, By: marsh, IP: [127.0.0.1]

L2: Annuitizing a portion of a direct rollover.You can do anything that you want if you don”t mind paying the 10% penalty tax!
There is no pre-age 59 1/2 penalty exception for buying an annuity from an insurance company.
If you want a stream of income from an IRA and you are under age 59 1/2, then the plan must meet the requirements of 2002-62 or you will pay the penalty.2003-02-06 12:32, By: Gfw, IP: [127.0.0.1]

L2: Annuitizing a portion of a direct rollover.GFW: Inyour “Unanswered Questions” article, you stated “Under Notice 89-25, a Life Annuity issued by an insurance company automatically qualified under method number 3.” You then posed a couple of questions which boiled down to: Do life annuities have to adhere to 2002-62 restrictions?
My impression was that these questions were still open and will need to be clarified by PLRs and/or additional IRS rulings. Has this changed, i.e., is it now clearly established that life annuities are bound by 2002-62?
Thanks!2003-02-06 18:30, By: Owen, IP: [127.0.0.1]

L2: Annuitizing a portion of a direct rollover.
A life annuity, maybe and maybe I answered a little too fast. Bill Steckler and I had about a 1/2 hour phone visit on this question only this afternoon. What it boils down to, is whether 72(q) (annuities) overrides 72(t) and Rev.Rul. 2002-62.
Plain answer, I just don”t know. Better answer, check with the issuing insurance company and find out if they will be coding the 1099R with a code of 2.
Another question for you, with interest rates at the lowest levels in years, why at an age of less than 59.5 would you be willing to trade the asset for a promise of a monthly income – a monthly income that will never change over the next 2, 5, 10 , 25 or 30 years? I”m 57, work in the insurance industry and wouldn”t even consider it!
If interest rates increase only about 3% in the next 3 years, what would the payment be? It might increase (also due to age) by about 125%! Ask the insurance company.
I guess I”m just not into immediate annuities until about age 70+2003-02-06 18:49, By: Gfw, IP: [127.0.0.1]

L2: Annuitizing a portion of a direct rollover.RE: “Another question for you, with interest rates at the lowest levels in years, why at an age of less than 59.5 would you be willing to trade the asset for a promise of a monthly income …”
Under these conditions, I wouldn”t. But I did want to know whether this open question had been resolved – which it apparently hasn”t been.A specific set of facts and circumstances might make a life annuity attractive to someone if it wasn”t bound by 2002-62. (For example, if the payout could be based on a more favorable mortality table and interest rate.)
Thanks for the quick response.2003-02-06 20:04, By: Owen, IP: [127.0.0.1]