Bust an old; begin a new?

L1: Bust an old; begin a new?My client started a 72-t a few years back at age 53 and realizes that he still has several years to go. He has withdrawn $150,000 so far, but he is wanting to bust the plan to get at his account for a real estate deal (personal) he cannot pass up, requiring another $150,000.
So get this: he has to pay$15,000 penalty on the prior withdrawals ($150k times 10%), tax on the new lump sumwithdrawal, at a higher tax bracket, but let’s say 28%, so $42,000, plus a 10% penalty on the lumpsum, another $15,000. Are only my clients so stupid?
Does anyone see any planning angles to minimize this train wreck?2006-02-09 16:13, By: Ron, IP: [65.75.17.45]

L2: Bust an old; begin a new?Add a little more moneyto the ‘train wreck’ – the interest due on past due taxes – this is the easy part since the IRS will do the calculations.
Some people just don’t understand. They really have to make a ‘killing’ on the real estate deal just to break even.
Good luck!2006-02-09 16:18, By: Gfw, IP: [172.16.1.70]

L2: Bust an old; begin a new?Ron:
No, you don’t have a corner on the market for, shall we say, “less than prudent decision making clients.” Remember that all we can do is “offer advise” … the final decision, no matter how dumb it may sound to us, is still the client’s decision to make.
My suggestion for you is to start writing a letter to your client documenting the impact his decision will have on his overall financial health, then get your legal department to review it along with compliance. Then make him sign a receiptthat he both has received and understands the letter’s content.
Then you should evaluate how much you want to keep this client. It may be time for him to begin working with another advisor … like himself.
Jim2006-02-09 16:31, By: Jim, IP: [70.184.1.35]