Rollover during 72t withdrawal and is bonus used to determine 72t amt?

L1: Rollover during 72t withdrawal and is bonus used to determine 72t amt?
Hi,
I am rolling 400k from a 401k into an IRA annuity that is giving me a 20% bonus credited to the withdrawal benefit if certain conditions are met. Since I can’t take a withdrawal from the annuity in the first 12 months without penalty. Can I divert my first
72t withdrawal before it gets rolled to the annuity? Second, once the balance hits the annuity it gets credited 20% on $382,845…so since I would technically be starting the rollover in transition phase and prior to it hitting the annuity…I am guessing
it would be based on the 400k before it hit the annuity. How does one keep track and is this acceptable if you keep good records?
2011-11-13 03:14, By: stevey53, IP: [98.244.20.186]

L2: Rollover during 72t withdrawal and is bonus used to determine 72t amt?
No, you cannot take a 72t distribution directly from a 401k and then continue the plan using an annuity IRA. The 401k and IRA are considered different types of retirement plans and therefore a 72t plan must be set up using one
or the other, but not both.
You could do a direct rollover to an IRA that is NOT an annuity and then directly transfer 90% of that balance to an annuity IRA opened with the insurance company. You then have two IRA accounts, the total of which will be your
opening 72t plan balance. Both IRAs are part of your plan, but you will take your first year or two 72t plan distributions from the small non annuity IRA. You can then take the rest from the annuity IRA and continue from there. For each year you must take
the exact correct amount out from either or both IRA accounts in total. That will avoid the first year annuity penalty. If there is an error and too much gets distributed from the annuity, you can roll the excess amount into the other IRA, but can only do
this once a year. That will provide you with some flexibility to make sure the exact correct amount is distributed.
That said, current annuities have many different bells and whistles and some of them may conflict with your 72t plan. Using an annuity is not recommended as a good product to involve with a 72t plan, and most insurance companies
do not understand 72t plans and may not be able to tell you of potential pitfalls. But it is possible to have a valid plan as long as everyone understands the program. You should also be sure you understand the total expenses of this annuity before committing
to it.

2011-11-13 03:47, By: Alan S., IP: [24.116.66.40]

L2: Rollover during 72t withdrawal and is bonus used to determine 72t amt?
I agree with Alan… annuities are seldom a good fit for a SEPP plan – especially those that have limits on withdrawals in the first few years. Many times an annuity is a great way to make commissions for the agent, but are not necessarily in the best interest
of the annuitant.
Is the bonus used to determine the 72t amount – not unless the bonus has been 100% credited to the contract on the date of the 1st distribution and all conditions for receiving the bonus have been met.
No date of birth given, but if your client is age 55 or older at separation from service, no SEPP plan is necessary
if the 401(k) plan allows for partial withdrawals.

Dlz… thanks. Change made.
2011-11-13 11:12, By: Gfw, IP: [205.178.73.77]

L3: Rollover during 72t withdrawal and is bonus used to determine 72t amt?
gfw — If possible, please edit your response to correct the last “is” to “if”.
2011-11-13 14:46, By: dlzallestaxes, IP: [96.227.217.194]