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Mid-Term Fed rates
So the 120% of mid-term rates have dropped from 3% more or less to 0.5% or so in the last couple months. Obviously this is concerning for a 72t plan starting in the near future unless under the RMD method. This drastically changes things for many people. I was just curious about the rates and what drives them, as far as I can tell it is the bond market?? I'm a year out from starting my plan and had always figured I would be in the 2.5% range so now I am skeptical that it would possibly rebound back to its historical averages in a years time? I haven't seen anything that looks at the future trending of this rate and/or if it is directly tied to the bond or stock market trends? I'm still good to retire with 72t just a little disappointed!
The federal mid term rates are based upon the average market yields of Federal treasury bills having a maturity length falling between 3 and 9 years. These are actually the same rates you would use for tax purposes for things like making a family loan lasting between 3 and 9 years, for instance, to avoid applicability of the federal gift tax.
So, you will want to watch the mid term treasury rates to get a sense of where the AFR is going to fall. It doesn't look like they will be improving any time soon, though.
Thats what I am now expecting. I guess there is always the RMD method but I was really hoping the rates stayed in the 2.5-3 range! 0.5 is ridiculous and almost useless for 72t purposes!