Max on 72t

L1: Max on 72tI have a client who currently has $1.1 million in IRA and is age 53. He has told me he needs at least $90k/ year. The maximum under SEPP is approx. $66k. The apllicable fed mid term is 4.71%. Does anyone have any suggestions.
Thank you,
Dean2005-08-10 19:16, By: golfgok, IP: [69.61.195.160]

L2: Max on 72tHi Dean:
Sometimes you just can’t get there from here with all the marbles you want to have like $90k / year and no penalty. Sounds like it’s time for a reality check for your client. Hopefully someone will come up with a better idea, but here’s something to consider:
1. Transfer about $100k into a very conservatively invested IRA which you will plan to deplete over a 1-year period and pay the penalty and taxes, and invest the larger IRA for Moderate Growth. Then after a year review the situation. Your client will be 1-year closer to 59 1/2, hopefully the Growth IRA will be more than $1.1 mil, and if the Fed keeps going like they have been this year, the AFR will probably be a good bit higher. All of this, hopefully, will give a more attractive SEPP payout. If this concept seems to make sense to your client and the growth works out, then you may need to repeat the cycle one or more years till the numbers work.
2. If your client doesn’t like this concept and we don’t get any better ideas, then it’s time to have that “reality talk” with your client and send him back to work. Suggest consulting.
Wish I had a better story but that’s about the best I can offer at this point.
Jim2005-08-10 19:42, By: Jim, IP: [70.184.1.35]

L2: Max on 72tJim. Thank you for the reply. Unfortunately, I have another question. Can you max out a SEPP and then take additional distributions and apply the other exceptions such as medical, higher ed. etc.?
Dean2005-08-10 20:01, By: golfgok, IP: [69.61.195.160]

L2: Max on 72tOh boy. You have just asked the greatest “nobodyknowsforsure” question to ever hit this site.
IRS Pub 590 … if you don’t have a copy of this stored in your documents folder go directly to the IRS web site and getone … seems to to say you can in some places and then it seems to say you can’t in other places. TheBadger has discussed this and included Code cites that only add to the confusion. His suggestion is to find someone to initiate a PLR, butthis method is cost prohibitive for the benefit one person will derive. My suggestion was a massive letter writing campaign to our hired guns in Washington (Congressmen & Senators) to stick an amendment in some bill to clarify this question. If the IRS would add clarifying language to Pub 590 the question would be answered.
If you are interested in some of this discussion just start going back to previous posts. Wish I had a better answer.
Jim2005-08-10 20:18, By: Jim, IP: [70.184.1.35]