72(t) question
I’m currently seperating from service at age 57, I want to roll over a portion of my account to a 5 year annuity IRA that will provide me with $1200 per month. Will this qualify for the 72(t) exclusion to avoid the 10% early withdraw?
I’m currently seperating from service at age 57, I want to roll over a portion of my account to a 5 year annuity IRA that will provide me with $1200 per month. Will this qualify for the 72(t) exclusion to avoid the 10% early withdraw?
Permalink Submitted by Alan Spross on Mon, 2008-09-08 20:27
If your plan will allow you to take periodic or flexible distributions directly from the plan, there is no penalty since you separated at age 55 or later.
However, if you wish to use an IRA annuity, you will have to either annuitize it or arrange to take annual withdrawals in an amount that complies with one of the 72t calculation methods. You will have to withdraw that exact amount for 5 years, and after that you can do as you wish. The insurance company can calculate the annuitized payment for you, but if you do not want a life annuity, better have the calculation double checked for accuracy and be sure to discuss your intent with the insurance company. You can use a reverse 72t calculator to determine the amount that needs to be transferred to the IRA in order to produce 1200 per month in distributions and still comply with the 72t requirements.