72t on the Net

72t to ROTH

I am going to throw out a possibility:1. If the IRA was split in 2 before this SEPP started, was the larger one used as the SEPP universe for the calculation of the payments and the withdrawals? I used reverse calculator and age 56 (in 2007) with int rate of 6.13% (max avail for Oct 2007 start, and I got a starting balance needed of $1,504,075 to - continued...

Immediate Annuity Value for One-Time Change

It shouldn't prevent the change, merely that it may not be excluded at the time of the change if it was part of the original SEPP. All that would be required is to get an accurate valuation from the insurance company's actuary so that it can be included in the calculation after the change. If the immediate annuity payment exceeds the first MD pa - continued...

Immediate Annuity Value for One-Time Change

Gfw,Would you say the IA purchase has effectively eliminated the switch to RMD, or has the IRS ruled that a present value calculation would be acceptable?. - continued...

low 72T interest...my idea to get around it

Prior to 2002-62, the most frequently question on this forum was what is a reasonable interest rate. The second most frequently asked question was how do I prevent my SEPP from going broke. Prior to 2002-62, going bust created a 10% penalty. I'm not saying that 2002-62 is right or wrong, but for the most part, people prior to its implementation we - continued...

low 72T interest...my idea to get around it

Mike:If you're looking for rationality in most government actions, you can stop wasting your time. Much of it is decided by committee, so we end up with numbers like 59 1/2 and 70 1/2... as if 59, 60, 70, or 71 were somehow too clear.Personally, I don't see what business it is of the government how or when we choose to spend OUR money... whether - continued...

life expectancy table discrepancy

Life expectancy is based in part on the mortality table being used in the calculations. Based on your figures, you were using the 1983(a) table - there are 7 tables available. Unfortunately, that's the table that was used before the Annuity 2003 table which produces 27 years as a life expectancy. Which is right? Both are right. In fact even though - continued...

life expectancy table discrepancy

On the life expectancy calculator here, the single-life result for someone age 58 is 25.9 and on the IRS table the result is 27.0 This is more than rounding tolerance. Can someone explain? - continued...

Immediate Annuity Value for One-Time Change

No you may not exclude. One of the problems with immediate annuities... they are easy to value at the beginning (premiums paid), but harder as time goes by. If it is a period certain annuity (no life contingency) then the value would be the present value of the stream of remaining payments. Your best bet is to have one of the actuaries at the - continued...

Immediate Annuity Value for One-Time Change

An individual started SEPP withdrawals from a custodial IRA. After starting the SEPP the individual used a portion of the balance to purchase an immediate annuity inside the IRA. Now that individual wants to do the one-time change. How would the immediate annuity be valued when determining the balance of the account to calculate the one-time cha - continued...

low 72T interest...my idea to get around it...reply

Unfortunately, it is doubtful if the 401K money will last till 591/2, so there will be nothing to rollover. Also we will need to start substantial distributions from the IRAs at some time..most likely before 591/2....so I cannot see how a Roth IRA conversion, even gradually, would work ( need maximim IRA balance for maximum distribution for a poss - continued...

low 72T interest...my idea to get around it

That interest rate they make you use is something I don't get. What in the world does an interest rate from the previous 2 months before you start the SEPP, have to do with a plan that may run for as little as 5 years or even more than a decade, far beyond the era and economic events that caused those interest rates to have been set? - continued...

NUA and 72t

There are several requirements for the NUA ( " NET UNREALIZED APPRECIATION" EMPLOYER STOCK") provisions of the tax code. If you receive appreciated stock or securities as part of a lump-sum distribution, then the net unrealized appreciation (i.e. increase in value since purchase of the secxurities in the plan) is not subject to tax at the time of d - continued...

low 72T interest...my idea to get around it

Take a look at your "after tax cost" of investing retirement plans in stocks. Assume that everything in your plans now will be taxed at regular tax rates of 25%-35%. Now look at the dividend income and growth. If you leave it in stocks in your retirement plans, then when you take distributions of the amounts above your current balances, they too wi - continued...

72t to ROTH

As Denise stated, a 72t distribution cannot be rolled over, and a Roth conversion is such a rollover, so it cannot be used to reduce IRA distributions under a 72t plan.However, a Roth conversion does NOT bust the 72t plan if done correctly. It would not be practical to convert the entire account after taking the annual 72t distribution, since the e - continued...

NUA and 72t

While this is possible, it does present a lot of administrative hurdles. First of all, your 72t plan would have to be emanate from the 401k and most employer plans do not provide any support for assisting you in meeting all the requirements. Any change in the distribution options the plan adopts prior to completing the 72t in the next 10 years woul - continued...

low 72T interest...my idea to get around it

You appear to meet the age 55 separation exception from the early withdrawal penalty, and you even refer to penalty free distributions from your 401k plan.Under those circumstances, the only reason to consider a 72t plan is if your 401k plan would require you to take a lump sum or other unacceptable form of distribution. You should be able to cont - continued...

low 72T interest...my idea to get around it

Hello. I am 55 and just retired. I WAS going to roll my 401K ( lousy investment choices) into my existing traditional IRA and start a 72T. But unfortunately this will not privide enough money to meet my living expenses. My idea, is to keep the 401K where it is and take penalty free withdrawals until the 72T interest rate perks up, and then roll wh - continued...

72t to ROTH

The least expensive alternative may be a home equity line of credit (or home equity loan) to supplement his RMD SEPP 72-T until he is 59 1/2. Assuming he needs an extra $ 2,000/month, that's $ 24,000/year tax-free from the house, and a tax deduction for mortgage interest totaling about $ 800 using 6%/month rate on the monthly distributions. You ca - continued...

72t to ROTH

The client will be 58 this year. We started in October of 2007 and has taken ~$140k so far. Before the 72t we split a 2.1 million dollar IRA into two IRAs. The balances now are 930k (SEPP IRA) and a 430k. These are his only assets aside from his home. He is retired and has no other income. He has decided that he can live on less the the $9385 he wa - continued...

72t to ROTH

Since he apparently doesn't need the money, I assume that he has a job or other assets that he did not have when he set up his SEPP 72-T.THINKING OUTSIDE THE BOX :When did he set his SEPP up ? How old is he now ? How much has he taken in distributions from his SEPP since setting it up ?It might be to his advantage to "bust" the SEPP, pay the 10% p - continued...

NUA and 72t

Dear Friends, Can an individual, age 49, take his appreciated stock in his 401(k) under section 72(t) and avoid the early withdraw penalty and not lose his NUA since it is not a lump sum distribution?Ralph Mendez - continued...

72t to ROTH

You can only convert (to a Roth) amounts that are rollover-eligible. So the answer is no… - continued...

72t to ROTH

Our client did take the distribution as part of a SEPP. The question is this...can we treat part of the current distributions as a ROTH conversion to keep the portion that he doesn't need anymore in a tax advantaged account. - continued...

72t to ROTH

If the funds are part of a SEPP when the plan was started, they must remain as part of the plan until the later of 5 years or age 59.5. With the exceptions of death, disability or a switch to the MD alternative, the payment as initially calculated must also continue. - continued...

72t to ROTH

My client wants to decrease his current draw but a change to the RMD method will now result in $2800 versus the $9350 he is currently taking. This go us thinking....Can an individual treat their 72t as a ROTH Conversion if their AGI is under the income cap and they have earned income? This would allow us to move the amount that he doesn't need to - continued...