My Strategy,... will it work??

[rdjrn]

Quote:

Originally Posted by pb4uski I would call Vanguard back and discuss it with them further. Reference IRS Publication 575 (Publication 575 (2011), Pension and Annuity Income) "Additional exceptions for qualified retirement plans. The tax (on early distributions) does not apply to distributions that are: From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees) (see Separation from service , later)......... Separation from service. In order to meet the requirements for the first exception in the list above, you must have separated from service in or after the year in which you reach age 55 (or age 50 for qualified public safety employees). You cannot separate from service before that year, wait until you are age 55 (or age 50 for qualified public safety employees), and take a distribution." I seem to have a faint recollection that Vanguard may have an unduly conservative view on these. Or it could be that the person who you talked to at Vanguard was misinformed. Also, you may want to check with megacorp and/or look at the megacorp plan documents.

Believe me, I've called Vanguard numerous times and talked with several people. All say I can't access the money until I roll it into an IRA. Megacorp confirms this as well.

As an aside,... I went by an Edward Jones office at lunch and met with an advisor. He was much less enamored with variable annuities than my previous FA was.

Anybody have any good experiences or problems with Edward Jones??

[pb4uski]

Just curious... did Vanguard and megacorp explain why the exception cited above in the IRS Publication does not apply?

I wonder if perhaps your plan doesn't fall within the "qualified retirement plan" as defined in that publication or perhaps the plan just doesn't allow withdrawals.

"For this purpose, a qualified retirement plan is:

A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)),....."

Doesn't make sense though.

[Rickt]

Variable Annuity is an Insurance product with very high sales load/fees. If your FA is recommending it, I would start looking for another FA as this one has his own self interest in the deal (not yours).

Anyway, if I were you I would keep things very simple -- invest $910K in a "Dividend Stock Portfolio" (check out DIVIDEND INVESTOR at AAII.COM). You will receive approx $27k/year in Dividends income and potential of growth in the portfolio without drawing out the principal.

You can earn another $18k/year (2%) by selling covered calls on individual optionable stocks in your portfolio. I recently started doing this--it's very easy and pretty neat but no FA will teach you this because then you won't need them anymore.

YOu keep your principal intact and live off the dividend income and the income you generate by selling covered calls. All the Best!

[pb4uski]

I happened to find an article on Vanguard's website that indicates:

"Another potential advantage: IRAs can, subject to very specific IRS rules, be tapped penalty-free for college expenses, health insurance premiums, or the purchase of a new home. And if you’re retiring early, say at age 50, you can set up “substantially equal periodic payments” from an IRA without penalty. (If you retire at 55 or later, 401(k)s provide penalty-free withdrawals without the need to meet the SEPP requirement. This particular withdrawal benefit is not available with an IRA.)" (emphasis added)

The link is The pros and cons of an IRA rollover | Vanguard Blog

[Katsmeow]

Quote:

Originally Posted by pb4uski Just curious... did Vanguard and megacorp explain why the exception cited above in the IRS Publication does not apply? I wonder if perhaps your plan doesn't fall within the "qualified retirement plan" as defined in that publication or perhaps the plan just doesn't allow withdrawals. "For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)),....." Doesn't make sense though.

I suspect that what may be happening here is that the individual's particular plan doesn't allow people to keep money in the 401(k) after leaving and doesn't allow post-employment 401(k) withdrawals. I don't know all the details but people are not necessarily allowed to stay in a 401(k) plan after leaving employment. When DH retired he was allowed to keep money in the 401(k) plan but when he wanted to withdraw something he had only 2 options (1) roll over the entire plan to an IRA or (2) start periodic withdrawals which would result in withdrawing everything in the plan through equal withdrawals (he was over 59 1/2 so that age 55 exception didn't come into it).

[pb4uski]

Quote:

Originally Posted by Katsmeow I suspect that what may be happening here is that the individual's particular plan doesn't allow people to keep money in the 401(k) after leaving and doesn't allow post-employment 401(k) withdrawals. I don't know all the details but people are not necessarily allowed to stay in a 401(k) plan after leaving employment. When DH retired he was allowed to keep money in the 401(k) plan but when he wanted to withdraw something he had only 2 options (1) roll over the entire plan to an IRA or (2) start periodic withdrawals which would result in withdrawing everything in the plan through equal withdrawals (he was over 59 1/2 so that age 55 exception didn't come into it).

Interesting. I suspect you are right that it has something to do with OP's specific plan. In a perfect world, 401k withdrawal options should be the same for all plans, but....

[RetireBy90]

While I would agree with the many comments about the variable annuity (just say no) and finding a way to save the 10% penality, I would comment on the $23K for 4 years. I am putting my first 5 years of draws into a ladder of 5 year CDs. There are better returns I know but it provides a safe guarenteed lump of $ each year while I learn to live in retirement. Being a vet you can join Pentagon Federal Credit Union and get 1.9% on 5 year CD today. Not greate but seems better than many others like a bank - Wells is offering 1.18% today.