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Mid-Term Fed rates  


MinnT
Posts: 2
(@minnt)
Active Member
Joined: 1 month ago

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!

2 Replies
steltek
Posts: 10
(@steltek)
Estimable Member
Joined: 1 year ago

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.

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MinnT
Posts: 2
(@minnt)
Active Member
Joined: 1 month ago

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!

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