Setting up a 72T and 401K rollover at age 51

You are here:
< Back

L1: Setting up a 72T and 401K rollover at age 51After reading through the postfrom the last 6 months having to do with separating at age 55. I have a couple questions.

I”ll try to give you the full picture since I might have more questions later. Plus thanks so much for all of the previous posts and discussions.

I”m 51 years old. I have a 401 K with $405,000, and an IRA with 30,000.

I also choose the cash balance retirement package at workwhich has a total of $557,000. This is available all inone lump sumor in two parts. Part 1, $210,000 in cash and then take the rest $347,000 in an annuitywhich will pay $40,000 a year until I die.

If I quit my job at age 51.

Can I roll my 401K over into my IRA and set up a 72T on the $435,000 and startpaymentsat age 51. I was confused on the previous discussions of being 55 for distribution from a 401k.

Will I have to pay a 10% penalty on the retirement taken as an annuity through the cash balance plan?

The annuity pays about 10% of the 347,000 placed in the annuity (so as a steady base income it seamed good to me) , if you were me would you not take the annuity and roll it all over into a 72T.

Sorry for so many questions, but thanks in advance,
Randy2007-01-11 12:36, By: R Baker, IP: [64.12.116.204]

L2: Setting up a 72T and 401K rollover at age 51Randy,I’m not an expert by any means, just someone in a very
similar situation having just severed from my employer and approaching 51. A few comments which will likely lead
to more questions:- You
should be able to roll the 401k to an IRA and establish a 72t. If you can wait till 2008 to roll your
401k, I believe the recent pension law changes will allow you to direct any
after tax funds in the 401k to a Roth IRA with the balance going to a
traditional IRA. Your plan needs
to provide that capability and you likely have to meet various criteria for
going into a Roth. In any event,
something to check out. – No
10% penalty (unless you bust), the only reason to go the 72t route.- I
assume the $40k annuity that you will receive in lieu of the $347k lump
distribution is actually the amount that you receive at the age of 60 rather
than at age 51. If that is what
they will give you at age 51, it is rich and you should definitely take it (to buy an annuity paying that amount
at age 51 would cost $608k). If
that annuity amount is what you get at age 60, with all things constant and
taking the lump, put it in a ten year treasury and then buying annuity at age
60 will yield you a marginally larger annuity. The rub is surely all won’t be constant and 9 years is a
long dead band for what is effectively locking into an annuity today for
receipt 9 years later. Too much
uncertainty for me, I’ll be taking as much as a lump as possible now, investing
a bit more aggressively than treasuries and if it doesn’t work out perhaps have
to get a job as a Walmart greeter.- I’m
looking at a 72t beginning in 2008 for tax smoothing versus using after tax
funds for the next 9 years and then hitting the IRA. I hope to be able to roll my 401k and split to a Roth and
TIRA in 2008. I’ll use my pension
lump distributions rolled to an IRA to fund my 72t.2007-01-11 14:41, By: cisco, IP: [69.91.50.188]

L2: Setting up a 72T and 401K rollover at age 51
Cisco,
Thanks for the help.
The $40 k is what I would draw at 51. It is a higher return, because that is the part that was in the original pension prior to me taking the cash balance offer. I”m really glad it sounds like I can set up a 72T. Like many I worked way too many hours when my kids were growing up only thinking of retirement. Now if I retire in May I”m going to Colorado Springs, where my son is in the Air Force and Fly Fish for a couple months. If I don”t have Bill (TheBadger) set up my 72T, maybe we can at least have dinner. Working at Walmart in the sports department sounds like the ticket. When I was in Co. the last time I was buying some fly fishing gear in Walmart and most of the guys working in the sporting goods department had retired from other jobs and they all said the liked their new job. Plus they had time for fishing.
Thanks again,
Randy2007-01-11 15:41, By: R Baker, IP: [205.188.116.133]