Investor0329 wrote:

- quote -

That may be true--but then the question arises about whether there
are enough assets in the retirement funds to allow the substantially
equal payments options to sustain you indefinitely--that is, could
you retire today? It may be especially important to ask if, as you
suggest, you are not planning to take a job to supplement that
income if it is not in your field and doesn't pay enough.

That is, the SEPP could serve to supplement a "below market" job
(though you'd have to keep taking it until 59 1/2 even if you landed
the job you want and your pay went up), but in your current plan it
may need to function as a complete replacement for lost wages.

Now, if your assets are significant enough to allow you to do that,
then your job position is realistic. However, if you don't have the
wealth to do that, then your position on the type of job you would
consider may need to be reevaluated since I doubt the SEPP will get
you there. Rather, your only real option would likely be to draw
more than the SEPP would allow, pay the 10% penalty in addition to
the tax, and then hope you land the job you want and can earn enough
to replenish your retirement fund. And, if the job market is truly
as bad as you suggest for you, what is the chance you will be able
to accomplish that goal.

I'm not saying that to be critical--just to suggest that you need to
have some sort of plan for how you are going to meet your financial
needs.

Now, that said, if you can reduce your living expenses down so that
you use a small enough portion of your retirement assets for the
SEPP plan, it may be workable. That I don't know and perhaps its
the case--but if you are looking at using 100% and trying to
maximize the payout, I would be very concerned both about being able
to stay on the SEPP plan *AND* on long term financial security.

--
Ed Zollars, CPA
Phoenix, Arizona

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<s23bd09clksb1d9qmrm57fit8rtd0skiq1[at]4ax.com> ...
- quote -


I realize this. I have been looking for a job 8-10 hrs a day, 5 to 7
days a week, for the past 5 1/2 months. Got zip. The job market sucks.
And I am frankly not interested in any old job. I am only interested
in a job in my field (data analysis, statistics, sas programming,etc).
My problem seems 3fold.. 1) I am over 50, 2) I am coming from a dead
industry (telecom) with no jobs and lots of layoffs so I have to
change industries, and 3) I currently live in a telecom corridor so
there aren't any or many jobs here so i have to move. It has become
apparent that employers are definitely biased against these 3 items.In
addition, there are hundreds, if not thousands of 'candidates' for
every damn position. One headhunter told me they got 1200 applications
OVERNIGHT for one position from all over the damn country.

Yeah..get a job..like winning the lotto.

and realize this... my attitude is this.. there is zero chance that i
will flip burgers for a living at my age and experience.

HW "Skip" Weldon wrote:

- quote -

I agree--the problem is simply shifting things around, and doing so
in a highly inflexible form. The problem isn't solved by taking
funds from the IRA--simply pushed around.

The other problem I find is that, in most cases like this, the
taxpayer finds that any acceptable SEPP amount ends up paying out
less than what they think they "need" to draw from the account.
That is, the SEPP exception really was designed to allow someone to
"early retire" using the retirement funds, but to do so by taking an
amount that would at least be "expected" to last the rest of their life.

The problem here is that I don't see someone who appears to be
saying he/she has so much put back that they are fine with retiring
today on the assets already accumulated. Rather, I see someone who
has lost his/her job involuntarily and seems to be scrambling to
find funds. If his/her IRA was large enough for this to work, they
wouldn't likely be scrambling...

--
Ed Zollars, CPA
Phoenix, Arizona

On 18 Jun 2004 20:20:08 GMT, Investor0329[at]Yahoo.com (Investor0329)
wrote:

- quote -

As Ed Zollars notes, you don't have to use an annuity to get the 72t
exception to the premature distribution penalty. Virtually any
Custodian should be able to help with the calculation, and if not,
roll the account to someone who will (Vanguard, Fidelity, etc.) In
fact, there are web site that have the calculator. Try a Google
search.

At any rate, I would be much less concerned with the extra percent or
two from an annuity than I would be about drawing down your retirement
plans. My view is that spending your retirement security now is no
solution - it merely postpones the problem into retirement. A
solution would be a job - any job. Also, another solution would be
financial planning (trying to find out what you are doing now with
money that is not absolutely vital.)

Good luck.

-HW "Skip" Weldon
Columbia, SC

Investor0329 wrote:

- quote -

He is talking about the substantially equal payment option for
avoiding the premature distribution excise tax. And, yes,
annuitizing the amount would be one method of meeting the
substantially equal payments exception to the penalty--but it's not
the only one by a long shot. Of course, for pure "substantially
equal" we're really talking about a "traditional" annuity (will pay
you $X per year for life or some period).

I would note there are a *number* of issues related to use of the
substantially equal payments option if that makes sense. First, the
exception requires that the substantially equal payment amount be
computed based on your life expectancy and drawing the amount out
over that period. You are essentially not allowed to change the
method until the later of five years or you reach age 59 1/2--in
your case, the latter is going to be the issue. And by change I
mean take either more or less than the computed amount based on
whatever computation method you use. If you blow it by $1, all
excise taxes are due back to the first distribution, along with
interest on the excise tax.

That presents a problem--not the least of which is lack of
flexibility during that period. If it turns out you need more
money, you can't get it from the account you use for this purpose
without triggering the entire excise tax. Similarly, if you find
employment and no longer need the funds, if you try and stop taking
them you'll also trigger the excise taxes back to day one. So you
could be faced with the choice of either paying extra income taxes
on money you don't need or want(and losing deferral of tax on
earnings on the amounts withdrawn) or paying a number of years worth
of excise taxes.

I would strongly suggest you seek competent tax advice in this area
before proceeding, as well as be given a complete description of the
tax downsides by your own tax adviser. There are ways to structure
this to help give some flexibility (for instance, you can put a
portion of your funds into one IRA account, and then only use that
account to compute the payment), but you need to realistically
consider whether the problems are worth the savings here.

As well, there are many ways to compute the payment amount, and
formal annuitization via an insurance contract is *NOT* required.
In fact, under certain methods, the "substantially equal" payments
may end up being nowhere near equal <grin> . Now, that said, true
annuitization may be helpful, but to preserve flexibility I would
try to minimize the amounts directed at the payment plan.

If you do annuitize the amount via a contract, be sure you
understand the contract *AND* what your options will be once you get
beyond the premature distribution period. Will the options you
select allow you to terminate the annuity payments? Or have you
been signed up for a true "for life" distribution option that will
either be costly or very difficult to get out of?

I generally strongly discourage clients from using these methods
except as a last resort since, in most cases, they are doing it
because of severe financial difficulties that make it very likely
they will not be able ultimately to live with the plan--they'll take
extra at some point since the money is sitting there and the plan
will then "blow up" on them.

--
Ed Zollars, CPA
Phoenix, Arizona

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<tbrvc05r9s1e3jntl3rso65mb75lphv8cs[at]4ax.com> ...
- quote -


I have been looking for another job for 6 months..and am still
unemployed. The problem is that there is little available in what I do
in the region of the country where I now live and it appears nearly
impossible to locate something out of region with all the 'other
candidates' out there...so I may eventually have to move. In any
case..I may have to dig into my IRA/401k savings for income and the
financial advisor at Merrill Lynch suggested this as a possibility. He
said it would be possible to set up the variable annuity..under a 72t
type arrangement and avoid the 10% penalty. However, based on what
I've read about variable annuities in general..I am highly suspect of
his motives..and don't like the expenses.

On Mon, 14 Jun 2004 19:29:32 CST, Investor0329[at]Yahoo.com
(Investor0329) wrote:


- quote -

Well, yes, your employment situation usually matters. Usually when
one's income declines, so too does their tax rate, and thus the reason
for using tax-advantaged investments such as annuities. But since we
know virtually nothing about you, we can't be sure.

Usually folks who are your age and unemployed have priorities other
than investing - exactly why are you looking for investments? And why
were they suggesting an annuity (as opposed to other ways to invest)?

-HW "Skip" Weldon
Columbia, SC

Go to www.manulifeusa.com to learn more.

Good secure company.

Go see a real financial planner, not a renamed stock broker and review your
whole situation.


"Investor0329" <Investor0329[at]Yahoo.com> wrote in message
news:1c0e7435.0406141538.1300faee[at]posting.google.com...
- quote -

The other day , my 'Financial Advisor' at Merrill Lynch called me
along with a John Hancock representative. They were / are trying to
sell
me on this variable annuity product called Manulife which I was told
will
soon be run by John Hancock.

They sent me some advertisement material on it..

When I asked about total fees, they told me about 2.8%.. which
includes 1.7% or thereabouts for the annuity and the rest for the
underlying mutual funds it invests in. There is also some other
possible fees, like .15% if you take 5% up front or something like
that...not sure.

Is anyone familiar with this variable annuity plan? Is it worthwhile?
In general,I suspect anything this these fellows send me as it is
usually
developed to bring *them* income off of my hard earned savings...

In any case..does Manulife differ from other variable annuities in any
way that
makes it worthwhile.

I am about 51 yrs old, and currently laid off...if that helps.


Any comments from knowledgeable folk on this subject which confuses
the hell out me would be appreciated.