The IRS vs. DB "Normal Retirement Age"

[Guest dory]

If an individual (assume 45 yrs old) wants to elect a retirement age of say, 55 or 60 - will the IRS actually hold him to "retiring" at that age?

I seem to recall that this was a controversy many years ago with individuals setting up plans using early retirement ages in order to sock away greater annual tax deductible contributions but in reality there was never any real intention of ever taking early retirement. Any thoughts would be appreciated.

[Guest dory]

...anybody?

[MGB]

It is not an analysis of what the person actually does. The IRS determines the appropriateness based on industry standards for their occupation.

Even then, they won't allow some young ages. For example, about 20 years ago a rock band in LA was challenged by the IRS for saying they would be retired within 10 or 15 years. Even though statistics could be shown that they probably would not still be working in that profession after that many years, the IRS refuesed to allow the very early retirement age they were trying to use.

If they are not in the police, firefighters, pilots, etc. categories, using anything under 55 will be challenged. Even 55 doesn't always pass muster, depending on the occupation.

[Guest dory]

Thanks for the response - that was also my general understanding, although personally speaking I know of no one personally who was challenged on it.

The reason why I ask the question to begin with has to do with some 412 (i) literature that I recently came across. This particular company's 412(i) product states that it uses age 55 as "THE" normal retirement age in order to maximize contributions. I am of course, skeptical about that.

[AndyH]

As Jim Holland said at ASPA this weekend in reference to the 412(i) mania, if it sounds too good to be true, it usually is.