72T
I have a client, age 50, w/ approx $500k of seasoned money (5yr rule) in an IRA. It has a required 72T distribution each year of approx $15k. The client wants to set up a Profit Sharing Plan for his company & roll the iRA into the PSP that will then use 100% of the money to purchase a permanent life insurance contract. Must he wait till age 59.5 (due to the 72T) before he can do this or is there a way to do it before it before without violating 72T?
Could he maintain enough in the IRA to fund the 72T each yr till age 59.5 & roll the rest into the PSP? Only problem w/ this is that it may not purchase the death benefit desired.
Thank you,
Permalink Submitted by Alan - IRA critic on Tue, 2020-11-03 20:19
He cannot roll any funds into or out of the 72t IRA account or it will bust the 72t plan per Notice 2002-62. Of course, if client just started the plan so that busting it will not result in the retroactive penalty being more than a couple years worth, it may be worth it to bust the plan. Actually, if he started the plan back in his 40s it might become less than ideal and he might end up busting it anyway. If he has to bust the plan at all, better sooner than later. Hopefully, client has carefully considered the pros and cons of purchasing the life contract in lieu of typical retirement plan assets.