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Discrepancy in online 72T calculators: possible rounding error?

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Posts: 32
Topic starter
(@acpapa93gmail-com)
Eminent Member
Joined: 5 years ago

Just wondering if anyone has plugged the numbers into different online calculators recently?  I did today (12/1/2020) at all the ones listed on this site. Including the one available on this site, the same number was generated ($11,398, with this site's being the most detailed at $11, 398.03), but on Bankrate.com's calculator, the distribution amount is $11,456. Mortgageloan.com has two calculators for 72t distribution calculations. One of those is called 72t Impact Calculator and one is called 72t Options Calculator. The former (Impact) gave a higher distribution matching Bankrate.com's calculator at $11,456, while the latter calculator (Options) matched this website's calculator, calcxml.com's calculator and this one: https://calculators.wealthmsi.com/fidelity/c72t   at $11,398. My guess is Bankrate.com and the Impact Calculator found at Mortgageloan.com are rounding the 0.47% interest rate up to 0.5%, though it doesn't make that adjustment on the screen. Any insights are appreciated. I had hoped to take my first distribution this month (full annual amount) and had hoped all calculators would produce similar results. I am thinking the lower figure is the right now. The balance used in this calculations is $359,319.15. Age is 50 and life expectancy factor used (single life) is 34.2.

5 Replies
Posts: 193
(@dlzallestaxesmsn-com)
Estimable Member
Joined: 5 years ago

In the past (on the previous website), sometimes the differences occurred when one calculation is done assuming monthly distributions, and others assume annual distributions. All interest figures should be using 2 decimal places. You are always safe using the lower amount because you can always use less than the MAXIMUM Interest Rate.

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Tracy
Posts: 32
Admin
(@tracy)
Eminent Member
Joined: 5 years ago

sanatsivdas, I tested both the Bankrate and our calculator site using your numbers and I think you're right: Bankrate.com rounded the interest rate from .47% to .5%. Using a larger AFR will get you in trouble so I agree with you and dlzallestaxes - go with the lowest distribution amount. By the way, the December AFR is up to a "whopping" .58%. Good luck!

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Posts: 32
Topic starter
(@acpapa93gmail-com)
Eminent Member
Joined: 5 years ago

Others have said it before, but I'm going to say it again: this website is an incredible resource for people like me -- ready to retire early and wanting to figure out how to do so without invoking IRS's wrath down the line. I've learned a lot from reading posts in the forum and to get an answer to my question so promptly is greatly appreciated. I haven't yet figured out whether to have 10% withheld by Vanguard at the time of the distributions since my annual distribution amount will be less than the standard deduction. And my SEPP distribution being my only income, I am not sure but think in the end I won't end up having to pay any taxes, or if I do have Vanguard withhold 10%, that I'll get that back as a refund when I do file for 2020. Has anyone encountered this scenario?

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Posts: 193
(@dlzallestaxesmsn-com)
Estimable Member
Joined: 5 years ago

Since your annual distribution is less than the Standard Deduction, and the SEPP 72-T is one of the exceptions to the 10% penalty, I would not withhold 10%. No sense giving the government an interest-free loan, and who knows how long you will have to wait for a refund.

However, if this is your only income, it would make sense if you have non-retirement investments for them to be ones that generate Qualified Dividends and Long-Term Capital Gains and/or Capital Gain Dividends from mutual funds. Since you will be in the 12% or 0% tax bracket anyway, you can have $ 40,000 of those types of income and still pay -0- income tax because those categories of income are taxed at 0% !!!! This interestingly includes Preferred Stocks who pay "Qualified Dividends" based upon their structure, and pay 5%-8% returns on those investments.

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Posts: 32
Topic starter
(@acpapa93gmail-com)
Eminent Member
Joined: 5 years ago

Thanks for the feedback. I opted to have no taxes withheld. I have no non-retirement investments and won't have any as I'll be living on just under $12,000 each year -- drawing from my IRA while watching it grow each year since the distribution is less even than the long-term capital gains which were just distributed AND I won't be paying income tax or even needing to file taxes other than just the form so the IRS knows the distributions are qualifying 72t distributions. It is good information if a windfall comes my way as I didn't know about those non-taxed types of income.

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