72(t) IRA Lump Sum Required

This tool allows you to determine the account sizes when it is necessary to split a rollover IRA into multiple IRA accounts. The owner may then take equal substantial payments from the account that will yield his desired withdrawal.

Enter a desired withdrawal from an IRA, the owners (and the spouse's) ages, and the assumed rate of return for the IRA.  The tool assumes the withdrawals will continue for life expectancy. Click [Calculate] to compute the lump sum IRA balance required to provide the desired withdrawals over the owner's lifetime.

Optionally, you may select joint life expectancy and this tool will use joint life expectancy for the calculation.

INVESTMENTS:

You must be registered with a broker/dealer to discuss investment concepts with a consumer.

TAXES:

This information is a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances.

LIFE INSURANCE:

Please remember the primary reason to purchase a life insurance policy is to protect one's beneficiaries through the death benefit.  However, permanent life insurance can also serve as an accumulation tool that has some very unique benefits. To qualify for life insurance, one must take a health examination to determine insurability.  Not everyone is insurable. Life insurance products contain fees, such as distribution fees and mortality and expense charges. The main way that a permanent life insurance policy is positioned to be tax advantaged is though policy loans.  Policy loans may reduce the cash value and death benefit of a policy, and if they are not repaid, a loan could cause a policy to lapse. If a policy is over funded and becomes a MEC contract, the contract's earnings will be taxed as ordinary income at withdrawal, and may be subject to a 10% penalty if withdrawn before age 59 1/2. All hypothetical presentations must be based off of policy illustrations, and the illustration must be presented to the client.

No script is provided for this screen.

Calculating Life Expectancy

The life expectancy is determined (looked up) from IRS tables. The program includes tables for both single life expectancy and joint life expectancy.

The life expectancy tables used in this program are from IRS Publication 590.

Calculating the Lump Sum Required

Method 1:

The required lump sum is simply the required withdrawal multiplied by the life expectancy. For example, if a 56-year old person requires a withdrawal of $50,000 and specifies single life expectancy, the program would look up his life expectancy and find it is 28.7 years. Next, the program would multiply the withdrawal of $50,000 by 28.7; this would give a required lump sum of $1,435,000.

Method 2: Amortization Method

The amortization method uses the same IRS provided life expectancy as above.

Method 3: Annuity Method

Method 3 is similar to Method 2, except an annuity factor is calculated using a complex spreadsheet. Then the required annual withdrawal is multiplied by the annuity factor.