Beginning Balance

L1: Beginning BalanceI have a client who has $500,000 in IRA assets. He wants to begin 72(t) withdrawals in the amount of $33,000 per year for the next five years. We plan to establish a separate “72(t)” IRA account but are having difficulty determining how much we need to fund the account with. When I run the reverse calculator it indicates that the “minimum” required starting balance is $215,000 (amortization method). Does the IRS require that the account have a “minimum” balance when beginning 72(t) distributions? Hypothetically speaking, why couldn’t we just deposit $165,000 ($33,000/yr X 5 years) into the account and use those funds for his withdrawals? Would the $33,000 exceed the amount the IRS would allow on a $165,000 balance? Do they somehow track the beginning balance on the account to make sure it complies with one of the calculations?Thanks!Neil2002-09-12 15:26, By: Neil, IP: [127.0.0.1]
L2: Beginning BalanceThe minimum duration of payments is the later of 5 years or age 59.5 – the payment is always calculated based on the owner’s life expectancy, consequently the name “Substantially Equal Periodic Payments”.The reverse calculator calculates the amount required to spread the desired payment over the owner’s life expectancy. The 5-year period never comes into play in the calculation of the amout of the payment.You may want to spend a little time browsing our FAQ section. 2002-09-12 15:37, By: Gfw, IP: [127.0.0.1]

L2: Beginning BalanceGfw,Thanks for the quick response! I read through all of the FAQ and still don’t see an answer to my question. So does that mean that since my client will only be taking distributions for 5 years we can simply deposit enough money to cover those distributions into the account and just make sure he takes out the same amount each year?It sounds like we don’t even need to mess with the calculations since he will not be withdrawing the money over his lifetime.Thanks.2002-09-12 16:02, By: Neil, IP: [127.0.0.1]

L2: Beginning BalanceMaybe you aren’t getting the answer you are looking for.FORGET THE FIVE YEARSCalculate the payment based on your Client’s LIFE EXPECTANCY. Neither the IRS, nor I, care anything about the 5 years. Payments are ALWAYS calculated based on LIFE EXPECTANCY.Does this clarrify? 2002-09-12 16:30, By: Gfw, IP: [127.0.0.1]