# Annuitization Method

You are here:
• Annuitization Method

L1: Annuitization MethodHello
I will be 56 in August 2013. I want to start 72t distributions in January 2013 on a \$640k IRA. Using the ammortization method I calculate an annual distribution od \$26,271 using 1.14% and a life expectancy factor of 28.7. That is December’s 120% midterm rate and the life expectancy for the age that I will be in the year that I start the 72t.
Today I heard a financial planner podcast say that the Annutization method may result in a higher payout and it will go up because each year it is recalculated with a shorter life expectancy value. I cannot find the annuity factor and the instructions to use it are confusing. Can someone steer me to the table and tell me how to calculate the 72t fixed annuitization amount? Was the podast right about annual recalc with changed life expectancy?
Vanguard’s worksheet says: “Using your interest rate (Step 2) and your age as of December 31 of the current year, calculate your annuity factor using the mortality table in IRS Revenue Ruling 23002-62, Appendix B”. Vanguard no longer provides a 72t worksheet or any support.
Thanks for your help and ideas.2012-12-20 23:45, By: telcoguy, IP: [74.110.0.227]

L2: Annuitization MethodThe amortization method will always provide a higher payout than either of the other 2 methods. The financial planner is just plain wrong or perhaps he is selling annuities.
Recalculation would be allowed on either the amortization or annuity method – even with annual recalculation, the amortization method always results in a higher payout.
You can prove it to yourself by using our calculator athttp://72t.net/72t/Calculator/Distributions- make sue that you also read our Planning Pointers.
2012-12-20 23:58, By: Gfw, IP: [205.178.67.189]

L3: Annuitization MethodThe result for amortization and annutization are very close in your calculator. If the annuitization method allows recalculation with reduced life expectancy it could exceed the ammortization method. The question is: Can either method be recalculated annually with a lower life expectancy without using a private letter ruling? Do users of the annuity method typically update their calculation? I thought the ammortization method was fixed unless one falls back to RMD and stays there.2012-12-21 01:09, By: telcoguy, IP: [74.110.0.227]

L4: Annuitization MethodYou need to spend a little time reading.
Using the recalculation method for either the amortization or annuity method, you MUST recalculate annually based on…

attained age as of 12/31 of each year; and
a new interest rate -typically the 120% mid-term rate for either the previous Dec or Nov; and
the balance as of the previous 12/31

The annuity method will never produce a higher annual withdrawal amount than the amortization method whether or not annual reacalulation is involved.