Joint Lifetime Single-Premium Annuity (Fixed) for a SEPP (SPIA)
L1: Joint Lifetime Single-Premium Annuity (Fixed) for a SEPP (SPIA)If I use an IRA to fund a Single Premium Annuity that provides a fixed payment for life based onthe joint life expectancy of my wife and me, can that be used in a SEPP?Just to be clear, this type of annuity provides the full payment each month as long as at least one of us is alive. (Would anyone know if there an annuity providerthat would code this as a 2 on the 1099R or is would a 5329 form be OK for this?Fidelity for some reason will not, but will use a code 2 if the joint annuitant is just a beneficiary for a limited period,like until age 80.)Thanks.2009-12-29 07:14, By: bellhead, IP: [188.8.131.52]
L2: Joint Lifetime Single-Premium Annuity (Fixed) for a SEPP (SPIA)>>Single Premium Annuity … can that be used in a SEPP? The answer is probably yes, but check with the Insurance Company that will be issuing the annuity and get it in writing from the company that it qualifies. At least that way if something goes wrong, you have something to fall back on. I’m surprised that they will only issue the annuity based a limited life expectancy of the beneficiary. After about 35 years in the insurance industry mostly dealing with annuities and IRAs, I have never really seen that option. Are you sure that they aren’t referring to an annuity for your life with a period certain to the beneficiary? Now my question to you. At your age (which is probably below 59) why would you want to purchase an annuity? Consider that…
You are effectively locking away you assets for the balance of your life at today’s very low interest rates.
You are effectively giving up complete control of your assets.
You are incurring expenses to the insurance company associated with mortality as well as possible commissions and other marketing expenses.
If you purchase a real joint and survivor annuity payable for your joint life expectancies and you die next year, all the funds pass to the insurance company and not your heirs.
I can possibly see the purchase of an annuity at around age 75 or 80, but not below age 70.2009-12-29 12:30, By: Gfw, IP: [184.108.40.206]
L3: Joint Lifetime Single-Premium Annuity (Fixed) for a SEPP (SPIA)Thanks for the comments!As far as locking in low interest rates, yes, I am aware of this. But even a few years ago (2004-7), $100,000 would generatea $500 monthly payment for me in my early 50s, vs. $470 now, so it is not that big a difference. I actually boughtsome of these in 2002 and 2005 and get a little more that $3000/month for the $560,000 I put in. I was planning to put about another $200,000 in. (of about $850K total and a fixed pension).I am OK with all the other issues.I was curious why I never see Single Premium Immediate Annuities mentioned in this forum, as they seem to be a good solution for a SEPP in some cases. I was told that, as single-life-annuities (just one person), these things automatically are covered as a valid 72T, but thingsget murky when a joint annuitant or beneficiary is involved. Fidelity, as noted, will not commit to coding the payments as a 2 for a 100% joint version, but will do it for a roughly 25-year guarantee to a spouse. The one I got at MetLife (through Fidelity) does not have this restriction, and agrees to the code 2 for the fully-joint annuity. So thanks again for your help. If anyone else can shed light on this joint-annuity issue, thanks in advance!2009-12-30 01:58, By: bellhead, IP: [220.127.116.11]
L4: Joint Lifetime Single-Premium Annuity (Fixed) for a SEPP (SPIA)If you are looking for a good reason to purchase an immediate annuity ask the thousands of conservative investors out there like me who retired early and suffered losses in 2000 and 2008. Many of us only wish we could go back and convert lump sum retirements to annuities. True the costs can be high and returns lower but that pales in comparison to not having the income at all which is where so many find themselves today. – John2009-12-30 18:48, By: john, IP: [18.104.22.168]
L5: Joint Lifetime Single-Premium Annuity (Fixed) for a SEPP (SPIA)One possibility for the difference in insuror approaches to joint annuitants is that once the IRA SPIA is purchased, the amount of the distribution will continue into the RMD period for the IRA owner. The IRS has published complex rules that limit the age difference with the joint annuitant so that the distribution will at least equal the RMD requirement in Sec 401(a)9. Its OK with the IRS for the payment to be greater than the RMD, but it cannot be less. This might explain Fidelity’s position.2009-12-30 23:30, By: Alan S., IP: [22.214.171.124]