Annuity distributions before age 59 1/2

L1: Annuity distributions before age 59 1/2It is my understanding that if I invest money into a “non-qualified” deferred annuity, and I need income before age 59 1/2, that if I take the income on a “regular, periodic basis”, like a single premium immediate annuity (SPIA) that it will avoid the 10% penalty. Is thiscorrect?
2006-04-28 13:57, By: Herr Bair, IP: [207.200.116.8]

L2: Annuity distributions before age 59 1/2Answer is maybe if you were to trade the deferred annuity for a settlement optionwith paymentsmade over your remaining life expectancy. Get something in writing from the insurance company before you start.
Answer is yes if you take the withdrawals as part of a SEPP (Substantially Equal Periodic Payment) plan based on the same assumptions as you would use for an IRA account.
Answer is that there would be a 10% penalty on any withdrawals that don”t meet the definition of a SEPP using72(q). Talk to your accountant or legal advisor.
2006-04-28 14:07, By: Gfw, IP: [172.16.1.74]

L2: Annuity distributions before age 59 1/2Let me expand some on Gordon”s explanation based on some of his earlier posts and conversations he and I have had in the past on this subject.
An immediate annuity (SPIA), or deferred annuity that is annuitized within 365 days of issue, will avoid the 10% penalty for distributions before age 59 1/2. However, my research reveals a problem trying to annuitize a deferred annuity within the 365 day limit imposed by the IRS. I haven”t found an annuity company that will allow annuitization during the first 365 days of the contract, and most require waiting 2-years or more. There may be a company that will allow annuitization within the first contract year, but I haven”t found it. So for all practical purposes, if you want annuity payments that avoid the 10% penalty, you have to start out with a SPIA.
Jim2006-05-01 13:28, By: Jim, IP: [70.184.1.35]