IRA Annuity 72t dist.

L1: IRA Annuity 72t dist.
What options, if any, are available toIRA owner who feels theneed for double the 72t distribution amount that is available to him/her? Are there hardship options to avoid tax penalty? And how does owner show qualification if such hardship options are available? Thanks…New to IRA Annuity Distribution rules …Any input much appreciated!

Thanks,
Nononsense 2006-09-12 20:53, By: Nononsense, IP: [24.198.62.70]

L2: IRA Annuity 72t dist.The only relief from an active 72t plan is due to death or total and permanent disability. I suppose those constitute the ultimate hardships, although they are formally considered penalty exceptions, not hardship distributions as in 401k plans. In addition, there is the option for a one time switch to the RMD method, but that would only increase the available amount if the account value has very substantially increased since the inception of the 72t plan. Usually the one time switch will reduce the distribution because the table factor produces a much lower distribution given the same account value.
Of course, if you have another IRA account available or a rollover source to a new IRA, you could start a second SEPP plan to produce the needed increase.
2006-09-12 21:47, By: Alan S., IP: [24.116.68.91]

L2: IRA Annuity 72t dist.Obviously we are all devoted here to avoiding surtaxes/penalties/interest in their entirety. That said, there are two potential solutions that I do not like but do work:
1. Start a SEPP plan and then borrow (maybe with a HELOC) for the additional funds needed currently waiting pay off the HELOC with additional IRA distributions when the taxpayer reaches 59 1/2.
2. Split a big IRA into 2 IRAs; start SEPP plan on IRA #1 and then take additional unqualified distributions from IRA #2. This at least shelters the major portion of the withdrawals from the surtax & one can mathematicaly solve for the correct split to minimize the surtaxes while achieving the needed total cash distributions.
I say that I dislike both of these alternatives for two reasons: under both solutions, the taxpayer incurs additional costs; either in interest or some surtaxes. Both alternatives likely take on some flavor of “over withdrawing” the equivalent of borrowing from one”s future.
TheBadger
wjstecker@wispertel.net

2006-09-14 08:00, By: TheBadger, IP: [72.42.67.99]