Amoritzation fussy math from Fidelity

L1: Amoritzation fussy math from FidelityI just set up a 72t distribution with Fidelity and the annual amount they calculated is over 5% less than what is shown on the online calcuators here, dinkytown.net and Fidelity”s own calculator ! They claim the difference is how their formular handles monthly interest. Here are them numbersAccount Balance 1590722.80Interest Rate 5.84%Age 57 Sept-1950Spouse 53 Dec-1954Joint LIfe NoPayments Annual AprilThe results from 72t.net, Dinkytown.net and even the Fidelity SEPP calculator are all within $1.00 of 116,888.The Fidelity “official” back office formular result is 110,278, a difference of over $6000 per year!! Can this be correct ?2007-04-16 09:20, By: 72Ter, IP: [72.85.173.34]
L2: Amoritzation fussy math from Fidelity72tr,
I went on my Vanguard IRA website, and used their printed explanation and formula steps for how to compute a 72t amortization (plugging all of their steps into an excel worksheet I made), and I got $116,888.90 for you, which rounds to the $116,889 that this 72t.net website calculator generates, and matches your expected number. I used page 9 for their Amortization formula, and page 11 single life table, which had life expectancy of 27.9 years. I played with life expectancy, and when I used 32.6 yearsI got $110,223 so maybe they need to tell you what they used for your life expectancy. If it was 27.9 yrs that they used, “they got some splainin to do!!” (I think)Ask them for the details of their calculations. There shouldnot be a diff of more than a $1 as you indicated. KEN
The formula is on page 9 if this link gets you in to Vanguard.
https://flagship.vanguard.com/VGApp/hnw/LiteratureRequest?FW_Activity=ViewOnlineActivity&litID=2210017233&FW_Event=start&view_mode=web&usage_cat2=MANGMTIR&viewLitID=2210017233
2007-04-16 11:29, By: Ken, IP: [151.199.18.84]

L2: Amoritzation fussy math from Fidelityfootnote–
The page numbers I referred to in last post (9 and 11) are from the bottom of the PDF program, but the printed page #s at bottom of theactual formsare listed as page 8 and page 10. KEN2007-04-16 11:33, By: Ken, IP: [151.199.18.84]

L2: Amoritzation fussy math from FidelityFidelity”s response.Fidelity internally calculates the amount of your withdrawals by
amortizing your total Fidelity IRA account balance as of December 31 of
last year over the remainder of the period using a “beginning of
period” assumption, and based on your life expectancy and the assumed
rate of return you specify. Based on this beginning period
calculation, the figure for the SEPP is $110,278.08, the amount
distributed.As we discussed earlier, most web tools, including
our own, do not reflect the “beginning period” assumption. The tools
use a “ending period” which adds in an additional 30 days of interest
to the final number. The additional $6610 that the web calculator adds
to the total represents an additional 30 days of interest.Most
importantly, our distributions group informed me that that both
calculations are acceptable to the IRS. As I”m sure you have
researched, the assumed rate of return can be altered by each
individual as long as it falls within the IRS “reasonable” interest
rate. The most substantial guidance that the IRS has given is in
Revenue Ruling 2002-62 which is detailed on IRS.gov. Fidelity is
comfortable with the numbers calculated on the web as they are not
incorrect, but rather show use a slightly longer amortization period by
using the “end period”.Comments?2007-04-16 19:22, By: 72ter, IP: [72.85.173.34]

L2: Amoritzation fussy math from FidelityWhat they are really saying is that their calculations match the method used when the IRS calculated their samples under 89-25. When the IRS released Rev.Rul. 2002-62, they changed the way theexamples were calculated.
Using the calculation options in 89-25, theAmortization and Annuitymethods had to be reviewed to determine which gave the highest distribution. Since 2002-62, the Amortization method always results in a higher payment.
The calculators on this site used to match the examples as produced in 89-25. After the IRS changedtheir method in 2002-62, we used the new method.
Is the old method still right? Possibly, but based on their comment they must have some written documentation from the IRSabout using the old method instead of using the method that is consistent with the examples in Rev.Rul. 2002-62.2007-04-17 02:20, By: Gfw, IP: [24.148.85.129]

L2: Amoritzation fussy math from FidelityEven accepting that this optional calculation is acceptable to the IRS, it would not be popular for Fidelity to dictate a method that yields 6% less than the 2002-62 recommended method. Most SEPP initiators want the largest distribution they can get with their account balance.
Perhaps yet another reason not to provide the exception code on the 1099R?2007-04-17 12:00, By: Alan S., IP: [24.116.66.98]

L2: Amoritzation fussy math from Fidelity72ter,
If you are stating that the Fidelitywebsite calculator generated the $116k per year number, and their “internal” calculator then set you up to get the $110k per yearamount, and if you really want that extra $6k per year for the next 5 years, I would tell them that you want the higher number and to fix their setup so you get it each year, (in other words, send you the addit $$ to get this total “right” and to change their paperwork for all future SEPP payments), or you will have to move your SEPP IRA(by trustee to trustee transfer) to a custodian who knows how to calculate the right amount. Clearly the lower amount will beallowed by the IRS, since it is just like using a lower fed 120% midterm interest rate than the max allowed for your distribution–that”s a lousy excuse when their website calculator is spitting out the higher number.
You just started this SEPP.. demand that they fix it, so first calendar year payout is on track for the $116k you want. When I setup a very similar (in $ size and age) SEPP at Schwab in March 2006, I sent them a completed SEPP Form from Gordon”s 72t.net website (and using his calculator and another online one to document the annual $$ amount) as my documentation, and it told them what I wanted per year and when to pay me, etc., and I asked them to check it to see if they agreed. They told me it was fine, and I got my first payment about a week later. I will be starting a 2nd SEPP with a Vanguard IRA in a month or so to pay for a second home near the ocean that we are buying in June, and it was good to see that the VanguardSEPP documentation (that I linked) on how to compute the SEPP amount matches the method used on this website calculator.Assert yourself, and if they balk,tell them you aretaking away that account. I think they will come around if they have a clue. Good luck! KEN2007-04-17 12:11, By: Ken, IP: [151.199.18.84]

L2: Amoritzation fussy math from FidelityFidelity”s explanation just doesn”t cut it. $6610 in annuity difference is due to 30 days difference in interest on your IRA principal…90k in 30 days on 1590k…where can I get that interest rate! I”m suspicious that they plugged $1500722 into their calculator rather than 1590722 as that will yield the annuity amount they quote within $2. A fat finger error that I made when trying to duplicate your calc and perhaps a simple coincidence.2007-04-17 14:43, By: cisco, IP: [24.238.169.112]