Will annuitization satisfy 72t
54 yr old plans to transfer employer sponsored plan into an IRA and annuitize immediately with life time payout. will that satisfy 72t distribution rules to avoid 10% early distribution penalty?
54 yr old plans to transfer employer sponsored plan into an IRA and annuitize immediately with life time payout. will that satisfy 72t distribution rules to avoid 10% early distribution penalty?
Permalink Submitted by Alan - IRA critic on Wed, 2017-06-21 22:36
No, it will not. Per RR 2002-62 there are only 3 approved methods to calculate the annual distribution from an IRA balance. Insurance companies do not use any of those methods to determine your SPIA payment. I do not know if you were to calculate a 72t annual distribution using the fixed amortization method to determine the annual payment using the max approved interest rate and asked the company if they would make that your annual payment for a life annuity if they would do it. If that payment was more than their usual payout they would not accomodate it, but if it were less they might consider it, but you would be receiving less than you otherwise would receive for a much longer period. If the 54 year old retires in the year he reaches 55 or later, any distributions directly from the plan would be penalty free, but the plan would have to offer flexible distributions. If that did not work, then he could do a direct rollover to an IRA and establish a typical 72t plan. The plan would end in 5 years or so and then he could annuitize if he wanted to.