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With the Systematic Withdrawal Income
Plan (SWIP®), your pre-59˝ clients can take
money from their qualified retirement
account without incurring the 10 percent
early withdrawal tax penalty.
By John Roeller, National
Accounts Manager
The good news is your client has
enough money in her qualified account to
retire early. The bad news (sort of) is
she’s only 55. Now she wants to know if
there’s a way to take income from her
retirement account without using an
immediate annuity and without incurring the
10 percent tax penalty for pre-59˝
withdrawals.
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Yes, she can.
The Exception
The IRS has something known
as a "72(t) exception," which
allows your client to avoid the
tax penalty if she takes
"substantially equal periodic
payments" at least once a year,
and if she continues taking
withdrawals for at least five
years or until she reaches age
59˝, whichever is longer.
There are lots of little
details surrounding the use of
72(t), but basically the
required minimum distribution is
determined using a formula that
looks at her account balance and
spreads payments based on her
life expectancy, or the joint
life expectancy of her and her
beneficiary.
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If it sounds complicated, that’s because it
is. And if your client makes a mistake, the
IRS can hit her with the 10 percent penalty
and retroactive interest charges.
The good news is that Symetra Life
Insurance Co. can help your client with the
72(t) exception. And, we’ll do all the work
for her.
SWIP and the President’s
Guarantee
Thirty years ago, Symetra broke new
ground in the income distribution industry
with its systematic withdrawal concept.
Today we call it the Systematic Withdrawal
Income Plan (SWIP®).
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SWIP was designed to provide
tax-advantaged withdrawals from
our fixed and variable annuity
products for qualified
contracts. It still does that,
but as mentioned above, it also
allows your client to access her
money when she needs it — before
turning 59˝ — without penalties.1
There are other plusses.
For clients who might object to
an immediate annuity, SWIP
allows them to maintain complete
control over their money. They
can start and stop payments as
their needs change. For example,
your client may want to
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start payments at 55, stop payments when she
starts receiving her Social Security or
pension benefits, and then restart payments
when she reaches the mandatory distribution
age of 70˝. This gives her a period of time
to let her money sit and grow.
Best of all, Symetra’s President’s
Guarantee — unique within the industry —
promises that distributions from our
systematic withdrawal programs are
calculated to satisfy all IRS guidelines and
requirements. If we make a mistake, we pay
any resulting penalty.2
Retirees Need Income Options
As the nation’s 76 million baby boomers
inch closer to retirement — the oldest began
turning 59˝ this year — many of them may be
thinking about early retirement. Or, they
may simply be forced into it. In fact, a
full 40 percent of retirees say they were
ushered into retirement before planned. Of
those, 41 percent had to retire due to
health problems and 34 percent were forced
out by layoffs.3
Whether they’re in retirement by
choice or not, statistics show that 30
percent of men and 40 percent of women
between the ages of 55 and 61 are not
working.4 Many in this group may
want and need income options while they wait
for Social Security and traditional pensions
to kick in.
For more information, contact the
Sales Center at
invest@symetra.com or 1-800-706-0700.
Ask about
Flex Income, a systematic withdrawal
option for nonqualified assets. You might
also want to
visit the IRS’s Web site for more
details on the 72(t) exception.
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1 Withdrawals may be subject to
ordinary income tax and a 10 percent federal
tax penalty may also apply to amounts
withdrawn prior to age 59˝. Consult your tax
advisor for more information.
2 This assurance is based on
the assumption that all information provided
is complete and accurate.
3 MSN Money, “Money
Doesn't Buy Happiness in Retirement,”
accessed online Oct. 12, 2005.
4 AARP, “Is
Early Retirement Ending (Table 1: Employment
Patters Among Older Workers, 1994 and 2003),”
October 2004.
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