Calculating fixed amortization method

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L1: Calculating fixed amortization method
I am 50 yrs old and I will be starting a new plan in March or April. I would like to know how to calculate the fixed amortization method for single life expectancy without using the calculators.
The calculator asks for –
account balance, interest rate, age
At age 50 the IRS Mortality table has two numbers
qx = 0.002409
lx = 966677
How do I use these numbers to calculate my distrubution?
Also I started my IRA in November of last year, for the account balance can I use its current balance or should I use December 31st of 2011?
Thanks for your help
2012-02-03 18:52, By: Bill, IP: []

L2: Calculating fixed amortization method
>>How do I use these numbers to calculate my distribution?
If you are asking, then you may be better off hiring an actuary to do your calculations. You could also merely use Excel (or similar) and the PV of an annuity with the payment due at the end of the year.

>>can I use its current balance or should I use December 31st of 2011?
If your plan started last year, there is no recalculation needed – use the same payment that you calculated for the November payment. If you made the plan more complicated and used the recalculation method, merely use your age as of 12/31/2012, the balance
as of 12/31/2011 and the max interest rate fron 11/11 or 12/11.
2012-02-03 19:06, By: Gfw, IP: []

L3: Calculating fixed amortization method
I was just asking about the account balance in my IRA. For instance if when I opened the account it
had $500,000 in it and today it has $550,000 can I use the current balance as my starting point.
2012-02-03 19:20, By: Bill, IP: []

L4: Calculating fixed amortization method
I’m confused. If your plan started last year in November, you would have used $500,000.
What was the date of the first distribution?
Did you define annual recalculation when you defined your plan? If yes, what were the specifications of the plan you defined?
2012-02-03 19:27, By:, IP: []

L5: Calculating fixed amortization method
Sorry to confuse you. Its really not a big deal – I haven’t started my Sepp yet – I am only asking if it is ok to use the
current balance in my ira as the account balance. I am really more concerned about my first question because it says everywhere to verify the calculation yourself. It must be a mathematical equation.
2012-02-03 19:47, By: Bill, IP: []

L6: Calculating fixed amortization method
Sorry, my confusion. You started your IRA in November, not your SEPP plan.
You don’t need the qx and lx factors – merely go to IRS Publication 590 and look in the table for your life expectancy as of 12/31/2012. Use Excell as per previous post and a starting balance that you can document that represents the actual value of your
account. The interest rate would be determined by the date of the 1st distribution. If you don’t match our numbers (and you probably won’t), use ours.
You can find the maximum interest rates at
Before you begin, also take a look at our planning pointers page

2012-02-03 20:11, By: Gfw, IP: []

L7: Calculating fixed amortization method
Excellent! Thanks for your help.
2012-02-03 20:42, By: Bill, IP: []

L7: Calculating fixed amortization method
With these rock bottom interest rates, you should use the highest account balance you can as long as it does not overly represent the actual balance on the day you start your plan. Since 1/31 balance should be higher than 12/31,
use that. If the market continues upward in February, and you start your plan in March, use the 2/29 value. In fact, you are not limited to a month end value and can use a specfic date value as long as you can make a copy of the statement from your on line
account. Month ends are just easier to document since a formal statement is usually available then.
The IRS has only said that the value be a reasonable representation of the current value. You are probably safe enough if you are not more than 15% off. If you don’t need the larger distribution, then partition your IRA into
two accounts and set up the account using the SEPP with the amount that generates the payment you want, but remember to factor in inflation in your costs and unexpected events over the next decade. The other account can be used for emergency needs subject
to penalty.

2012-02-03 20:49, By: Alan S., IP: []

L8: Calculating fixed amortization method
Great ideas Thanks Alan.
2012-02-04 17:35, By: Bill, IP: []

L3: Calculating fixed amortization method
One thing I learned when using and checking the calculations for 72T is that you need to consider whether the withdrawals are to be calculated from the “beginning of the period” or from the “end of the period”. If you use Excel there is the ability to select
either beginning of end of the period to perform the calculation.
For instance, in my case I set of the SEPP to begin in July 2011. I calculated the distribution amount and checked it against what my broker had calculated. We came up with different numbers because they use beginning of the period and Excel defaults to
end of the period. I think their logic for using beginning of the period was sound because it is less likely to be challengeable by the IRS, ie it is more conservative.
2012-02-10 12:32, By: lrd, IP: []

L4: Calculating fixed amortization method
Actually, while you may think their logic is sound, it doesn’t match the IRS calculations.
Prior to Rev.Ruling 2002-62, the amortization method used the beginning of the year calculation. However, when the IRS published their sample calculations for 2002-62, they used the end of the year calculations.
Eithermay be acceptable, but you will only match the IRS if you use the end of year method. And if you use the end of the year, the distributions will be higher.
2012-02-10 13:52, By: Gfw, IP: []

L5: Calculating fixed amortization method
You can find the IRS sample calculations here…,,id=103045,00.html#7
2012-02-10 13:54, By: Gfw, IP: []

L6: Calculating fixed amortization method
I believe this issue also surfaces with some firms that use calculators that produce different results depending on the distribution frequency, eg monthly, quarterly, annual etc. I think that Fidelity was one of those.
But we feel there is no difference in the annual amount to be distributed based on the pattern used for distributions. The same annual amount to be distributed applies, and that is also the amount reported on the 1099R regardless of the number and timing
of the distributions.
2012-02-14 17:13, By: Alan S., IP: []