using an SPIA for a 72 t
I have a client that wants to receive a 10 year period certain payment from a fixed interest SPIA, while leaving the other assets to grow. Can he do this? I know he can aggregate the IRA accounts to determine the 72 t amount, but can he transfer some IRA assets to a SPIA account in order to get the monthly payment? He is 50 years old today.
JR Smith
Permalink Submitted by Alan Spross on Wed, 2008-07-09 18:30
Yes, this can best be done with a current 72t plan (except an RMD method plan) by perhaps transferring the amount needed to have the SPIA IRA account generate around 90% of the 72t payment and using the current IRA to supply the remainder and serve as a safety valve to make sure the exact 72t amount has been distributed by mid December. With more moving parts of his plan, he will have to be very careful to set this up correctly. In addition, he will probably have to file a 5329 to claim the 72t exception if he is not already having to do this.
One caveat here is the threat posed by PLR 2007 20023, where the IRS busted a 72t plan for making a partial transfer. However, this ruling is probably an aberration since the IRS has not be able to explain it and also they have not bothered the thousands of other partial transfers that have been done. But at least you should make him aware of whatever small risk this PLR creates.