Using 8 year SPIA???

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{Edit: SPIA: Single Premium Immediate Annuity}

L1: Using 8 year SPIA???Receiveda proposal from a financial advisor and would like some input if this will work for 72t. Itdoes not seemto meet the 72t rules as I understand thembut would like additional comments. Age 52 and need to generate about $36K/year income from $800k (IRA account). They proposed using a ladder approach andstarting out using an 8 year $259K SPIA that would generate ~$36K/year until 59.5. The remaining balance of the IRA ($544K) would be invested to provided income for the years after I reach 59.9. My obvious concern is the initial 8 year SPIA they proposed. Doesn’t the distribution have to be based on life expectancy? It would seem to me that the best $259K could generate per year and meet the 72t rules is ~$13K.2010-02-08 20:36, By: Rick, IP: []
L2: Using 8 year SPIA???I’m just looking at some quick numbers, but $275,000 earning 1.3419% will pay out on an amortization schedule about $36,000 annually at the beginning of each year.

If you invest in nothing more than a 7-year treasury, you can earn 3% per year and by going to a 10-year treasury, the interest rate will jump to about 3.59% – these rates are as of last Friday. Are you really sure that you want to purchase a SPIA? The difference between market rates and what they are paying typically goes to commissions, marketing costs, etc. If you really need their assistance, use the SPIA, but realize that you will be paying a price for their services.

If you place $800,000 in the SEPP, it will need to generate about $39,879/Year based on current interest rates. You only need $722,179.80 to pay $36,000/year – the difference (800000-722179.8) or $77k+ could be carved out and used for emergencies, etc.

You might want to consider using about $500k in treasuries and the balance in something more liquid – you should still be able to get more than 1.34% in a short term CD or based on the amount of cash, in a money market fund.

I suggest that you spend some time reading the information on this website and get some assistance before you make your decision to turn over your $800k – all I can tell you is that based on the information in your post, I wouldn’t personally participate in the SPIA or the plan being offered.

While I have done some quick calculations and given a few suggestions, please remember… This forumis provided for informational purposes andit not intended to be relied upon as a source of investment, tax or legal advice.
2010-02-08 21:41, By: Gfw, IP: []

L2: Using 8 year SPIA???I was your age when I started a SEPP paying me 18,300 a year/ $1525 monthly. I used the balance of my IRAas of 12/31 ofthe previous year, the allowable rate for either of the 2 months prior to my first payment, plugged in my age, single life expectancy and got a monthly figure and took less than that amount to be on the safe side.I was audited by the IRS in 2008 and they approved of my plan. Itake montly paymentsand infirst yearI took a “stub” yearpayment for 4 months (started Sept. 1 2004). My first day of allowable change is March 17 2010 per the calculators (last year can be a stub year also), the day AFTER I turn 59.5. I will have met the requirement: 5 years of payments or age 59.5 whichever is later.I don’t think your plan works.If you have multiple IRA’s each must be treated separately and meet the requirements. It doesn’t seem like the annuity idea will cut it with the IRS if you just have 1 IRA with 800,000.You can’t just take the part that meets your needs for income through an annuity and ignore the rest. Of course it gives the financial planner a commission.Is this through Fidelity? They don’t know what they are doing when it comes to SEPP. If I listened to them I would have owed the IRS about 25,000 in back taxes and penalties. When I got audited,Fidelitysaid “good luck you are on your own, this was all your idea.” Don’t sign anything that releases the person from your tax penalties if there was an error. If yourfinancial guy says I’ll sell you the annuity ANDI’ll pay the penalties and interest from my E&O if there is an audit and an adverse ruling, then do it. Get it in writing. Watch how his advice changes.Follow the traditional rules for SEPP -keep it simple. The IRS leaves no room for self interpretation of SEPP regulations. 2010-02-11 17:27, By: tom palm springs, IP: []

L3: Using 8 year SPIA???You do not have to take distributions from all IRA accounts, either for a SEPP 72-T or for Required Minimum Distributions from Traditional IRAs after 70 1/2.You must take the correct TOTAL DISTRIBUTION from all of the APPLICABLE IRA accounts collectively. So, you can take from one or several separate IRA accounts that you have designated as your “SEPP 72-T IRA UNIVERSE”, so long as the total distribution equals your required SEPP 72-T annual distribution.( Similarly with RMD after 70 1/2.)2010-02-11 18:26, By: dlzallestaxes, IP: []