Quick 72t Question
58 yr old client has 250K in one IRA and 750K in another IRA. Can we put the 250K into a 5 yr certain SPIA and satisfy the SEPP requirements instead of taking smaller payments over the client’s life expectancy?
This would obviously generate higher payments since the entire 250K would all be distributed over 5 years instead of 25+ years. It seems logical to me that the IRS would allow this since they are getting their taxes faster this way than if the client took smaller payments out over her life expectancy.
Permalink Submitted by Alan - IRA critic on Thu, 2018-05-03 15:20
No, a 72t penalty exception requires that the distribution be calculated using one of the 3 available methods as outlined in RR 2002-62. Currently, the highest payout method of fixed amortization produces around a 5% of balance 72t distribution. There is no penalty exception for IRAs by simply annuitizing, but there is a penalty exception for non qualified annuities.
Permalink Submitted by William Tuttle on Thu, 2018-05-03 16:36
The client doesn’t have any other way to bridge income for <= 1/2 years? Even with the best intensions, there is a high rate of 72t failures.