Question on 72Q
I have a client who has two Nonqualified annuities and I would like to take withdrawals out of one of them.
I want to use both annuity values to calculate the 72q withdrawal amount then take the withdrawal from one of the contracts.
Can I do this?
Permalink Submitted by Alan - IRA critic on Tue, 2018-06-26 23:11
Yes, the same basic rules apply to NQ annuities that apply to IRAs. You can aggregate the two annuities but you must be careful with respect to both accounts not receiving any contribution or distribution that is not part of the required SEPP distribution. Each annuity has it’s own cost basis, but you will probably be receiving the taxable earnings first before getting to the investment in the contract.
Permalink Submitted by Teri Espinoza on Thu, 2023-01-12 23:29
Hi there,I have a client with a Non Qualified annuity and 72q distributions in place. She is only 49 years old and has been receiving distributions since 2020 (4 distributions so far) She needs to take an additional distribution for the year 2023 (pay taxes and penalty for this one) and then continue with her regular yearly distributions. Is this even possible?
Permalink Submitted by Alan - IRA critic on Fri, 2023-01-13 00:18
No, it would bust and terminate the 72q plan and she would owe the penalty plus interest on all distributions back to 2020. Generally, starting a 72t or 72q plan in your 40s tends to lead to a busted plan, probably even more so in times of high inflation because the payments turn out to be inadequate at some point. At least this plan has not been in place too long and busting it now costs a lot less than 5 years from now.
Permalink Submitted by Teri Espinoza on Fri, 2023-01-13 23:58
I though as much but wasn’t certain, thank you for confirming. And yes, that’s what we are doing, busting it now and giving her more flexibility with her money. One more question: Do we need to complete a special form to bust the 72q or simply to stop receiving the distributions?
Permalink Submitted by Alan - IRA critic on Sat, 2023-01-14 02:14