Change in investment IRA

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L1: Change in investment IRAMy husband had to take early retirement from ATT at the end of 2006, at the age of 51. He took his 401K as a lump sum and roll in over into a couple of IRAs. We were advised that we could take distributions from one of the IRAs under the 72T rule. The distribution was set up on stocks with Franklin Templeton, The amount was calculated with the annuity method. We didn’t ask too many questions, just signed a paper that this is what we wanted to do. We decided on the amount to take based on the fact that we didn’t know if my husband would find a full time job.Well the stock market crashed, and we decided to move the funds to a managed account with Fidelity before we lost it all. Fidelity said no problem with the 72T just take a lump sum at the end of the year equal to the amount you would have taken had you left it in Franklin. (We moved the funds in the fall of 2008).Question: was it OK to take the lump sum instead of the monthly payments?We have not yet given Franklin to withdraw the amounts monthly for this year. They said we could just call them each month to have the amount withdrawn, or we could send them paper work.Fidelity we should file form 5329 for 2007 withdrawals, even though the 1099Rs from Franklin had a 2 in box 7. They also said we should file a 5329 with 2008 tax return as the Fidelity 1099R has a 1 in box 7. The advisor at Wescom who set up the 72T for us told us to withdraw an amount of $1875 per month based on the calculation he did. When we moved the funds noticed that this amount does not add up to the total amount per year we should have been withdrawing according to the paperwork he sent to us. Does this matter? Also, we starting the withdrawals in February of 2007, so the amount we withdrew in 2007 is $1875 less that we withdrew in 2008.We are seeking the advise of a CPA in this matter, but any input you have would be helpful.My husband is extremely worried that we will owe the IRS a penelty on what we have withdrawn so far. And we want to make sure that withdrawing $1875 is the right amount to continue with.We would like to take advantage of the one time change in the calculation and withdrawal amount at the beginning of next year, but are wondering if we have already “changed” because the amount we are withdrawing is not the same as was calculated in the first place.2009-02-01 00:07, By: Nicki, IP: [69.234.218.38]
L2: Change in investment IRANicki,You have presented a lot of information and a lot of questions. I think we need some more specific info:1. Was one IRA used for the SEPP, and if so did you transfer that same IRA to Fidelity in 2008? 2 What was thebeginning balance figure on the SEPP IRA (and date of that balance) and the interest rate listed that was used in the paperworkto compute the SEPP payments? 3 What did the Westcom person compute as your annual withdrawal “on the papers”? Did he submit that to his company for the payments to begin? 4. Where did the $1875 per month figure come from?5. What age did your husband attain in 2007? 6. Did you make up the “missing Westcom” monthly payments after the transfer with one payment for same total at end of 2008 from Fidelity? 7. What was amount in BOX 1 on 1099-R from Westcom/Franklin for 2007 and for 2008, and what was amount on 1099-R from Fidelity for 2008?Once we can plug some of this info into a SEPP calculator on this site, (and look up old interest rates for Feb 2006 start), we can see what it says the max annual Annuity payment shd be, and answer some of your other questions. KEN2009-02-01 04:41, By: Ken, IP: [71.192.120.143]

L3: Change in investment IRAThank you for your help: Answers to questions:1. One IRA was used for the SEPP and we transfered it to Fidelity in 2008.2. The paperwork we received from wescom is a print out from 72t on the net, dated 11/7/2006. Owner’s Age-51, Beneficiary’s Age-50; Total IRA account Balance-$327,057; Amount Allocated to SEPP-$327,057; Reasonable Insterest Rate-6.03%; Actual Investment Rate-8%; IRS Penalty Interest Rate-8%; Use Joint Calculations-No3. 33.3 Years Life Expectancy – $22,549.43 ($1,879.12/mo) Annuitization Method.Then there is a table with Age/LifeExp/Beginning Bal/Annual Payment/Annual Interest/Ending Balace/ End of Year/Cost to Bust.4. The advisor at Wescom had us sign a Franklin Templeton form IRA Distribution Request. He put on it for monthly distributions of $1,875 with tax to be taken out at the rate of 18% Federal and 1.8% State. And hand wrote 72T on the form.5. My husband turned 52 in 2007.6. Yes, we took a lump sum equal to the amounts we would have taken if we had left the funds with Franklin.7. For 2007 the total amount in the 1099Rs from Franklin equal $20,625 (which is $1875 short of 2008 distributions because the distribution did not start until February 2007).For 2008 have a number of 1099Rs from Franklin, as the funds were moving from into different stocks through out the year. The total amounts in box 1 equal $16,250.The 2008 Fidelity 1099R has $6250 in box 1.So the total distributions we took for 2008 were $22,500.We have instructed Fidelity to make an $1875 distribution for January 2009 and have the paperwork to send them so that monthly distributions will continue in this amount for the remaider of the year.Thank you for your help. We feel so stupid going into this whole thing without really knowing what we were doing. 2009-02-01 23:48, By: Nicki, IP: [69.234.218.38]

L4: Change in investment IRAWithout checking the validity of the original calculation regarding the annual distribution of 22,500, there does not appear to be any problems with the different amounts for 2007 and 2008.For 2007 you have a choice between distributing either 11 or 12 months of distributions, and you elected 11. For 2008 until your final year, the full annual distribution must be taken, and you did that in 2008 between the two IRA custodians.There is no need to amend your 2007 5329 since it was coded correctly with the exception code. But you will have to attach a 5329 to change any of the 2008 1099R forms that apply a code #1 in Box 7.Therefore, the only issue appears to be whether the 22,500 checks out as an acceptable initial amount.2009-02-02 04:14, By: Alan S., IP: [24.116.165.60]

L5: Change in investment IRANicki,Could you explain the comment about not telling Franklin to send any payments yet this year?? I assumed you transferred theentire IRA that was used for your 72t plan to Fidelity in fall of 2008.If you had 2 IRAS with them, and transferred the one (with starting balance of $327K) that was used for the 72tto Fidelity, then any moneyyou have Franklin send you now fromthe other non-72t IRA prior to him turning 59 1/2 will generate a 10% penalty and is not considered as part of your 72t withdrawal. If you made 2 IRAs and they totalled $327k, then this means your 72t plan was designed using the combinedbalances of both accounts. Please clarify this.Now I will comment on the payment amount you outlined:The Westcom person seems to have used this website’s calculator, but the problem is that he used the max rate of 6.03% that was from Sept 06, and only valid for either an Oct 2006 or Nov 2006 initial payment. Since you did not start this 72t planuntil Feb 2007, you have to use either the DEC 06 rate of 5.51%, or the higher Jan 07 rate of 5.70% as your max rate. (You could have used a lesser figure than those, but not more than 5.7% for a FEB initial payment using AMORTIZATION or ANNUITIZATION.) In addition, your husband’s attained age in the year 2007 of initial payment is 52 (again caused by the SEPP not starting until 2007). With all of that in mind, I pluggedyour numbers into the same 72t calculator on this website, and using 5.7%, and age 52, with your $327,057 starting balance he had used, I got Annuitization of only $1833.48 per month, and Amortization of $1864.68 per month, so the $1875 per month is actually too high, and a possible problem.There is one possibility.. if his year end 2006 or Jan 2007balance was a higher figure than the $327,057, you might be able to back into a new set of numbers that get you to the $1875 you have been taking, and it may include a tweaking of the interest rate to a bit less than 5.7% max allowed, which when used in conjunction with a slightly higher starting balance, could get you to the $1875 per month or $22,500 per year figure you have been taking. For example, I used the REVERSE calculator on this site, and a starting balance of $334,462.50 with 5.7% and age 52 would yield Annuitization of $22,500 per year, or $1875 per month. If your balance was a bit higher than that, use the regular SEPP 72t calculator on this site, and lower (from “reasonable interest rate field”) .01% each time from the 5.7% rate, thenrerun results to see if you can get to the$22,500 annual payment. (The actual interest rate does not affect the results.. It is used in the formula to estimate how long your money will last when factoring in annual gains from investments) Just an idea. BTW- If I got this right, and Westocm handled your Franklin investments, he shd never have “rounded” the desired payment amount on the paperwork after he generated the “correct” amount (if plan started in Nov 2006) in the computation, and he shd have told you that the payment had to start in NOV 2006 for that computation.I will let Alan and others comment on what problems you have at present, and if the tweaking idea might work if you have a higher balance in the account that your have a printout for to support for a date prior to the start of the initial payment.KEN2009-02-02 05:42, By: Ken, IP: [71.192.120.143]

L6: Change in investment IRAAssuming Ken is correct, having checked the actual variables, then the plan is busted unless you can “back into” the 22,500 annualized amount by using a higher account balance. The stock market was in a very slow increase mode from late 2006 through January, 2007, therefore locating a higher account balance will be tough unless a large holding was much higher during that period, and you could generate a copied statement showing the balance high enough to produce the 22,500. You might conceivably go back as far as the Sept 06 month end statement to locate that higher balance. As Ken indicated, once you locate the higher balance, the interest rate could be tweaked downward to get the exact 22,500 annual amount.2009-02-02 19:25, By: Alan S., IP: [24.116.165.60]

L7: Change in investment IRAAnswer to why we haven’t instructed Fidelity to make any distributions this year:I was concerned that the amount of $1875 per month, $22,500 per year was not correct.We have taken $1875 for January.I don’t know why wescom used figures for 2006. My husbands final day at ATT was 12/19/2006. We didn’t receive his 401K (ironically from Fidelity) until January 2007, and therefore were not able to make any withdrawals from the Franklin IRA Wescom set up until February.Clarification: Wescom set up two IRAs for us, one with Franklin and one with AIG. We only used the Franklin IRA for the 72T. We only transfered the Franklin IRA to Fidelity.I will try to find my Franklin Statements for January and February 2007. But it looks like the 72T plan was set up incorrectly in the first place.What is our best course of action?2009-02-02 23:06, By: Nicki, IP: [216.100.91.2]

L8: Change in investment IRAI am almost certain that we invested an amount totaling $330,000 into the Franklin IRA. It was divided equally between three accounts of $110,000 each. I don’t know where Franklin got the amount of $327,057 from. Again, how stupid were we do this without knowing what we were doing. I am angry with Wescom, as it is obvious now, they did not know what they were doing either!2009-02-02 23:57, By: Nicki, IP: [216.100.91.2]

L9: Change in investment IRAHow much was placed in the AIG IRA?If a fairly modest amount, then it might be used as part of the 72t plan. The higher total balance might be used to offset the fact that the interest rate that was applied was too high. This is at least looking at even though it is a long shot. The interest rate can be lowered but cannot be higher than the published rate.What we need here is a total balance for the two IRAs, however this balance must be determined on the same date if at all possible. If not, the closest date possible prior to the receipt of your first 72t payment.2009-02-03 03:30, By: Alan S., IP: [24.116.165.60]

L10: Change in investment IRAMy suggestion is for you and your husband to call a meeting with your Wescom advisor and his / her manager, and let them show you their calculations and explain their rational for how they arrived at their numbers. Take good notes. Don’t leave until all of your questions are answerd and you have a full understanding of their rationale.This is important: During the meeting, DO NOT threaten or even hint at takingany legal action against Wescom or the advisors. Once you do, all conversations stop and it becomes a “complaint” which sets up an adversarial relationship. All you want at this meeting is to gather information. After you leave the meeting with all of your data, then is the time to figure out your next course of action. Be sure to get competent adviceon how to proceed. If a complaint is warranted, then put it in writing and send to the advisor.After you gather the information, come back here and let us know what they said. I’m sure we can quickly figure out if you have a good SEPP Plan or if it was “busted” from the outset.Jim2009-02-03 16:29, By: Jim, IP: [70.167.81.119]

L11: Change in investment IRAWe are not interested in tweaking any numbers or involving our AIG IRA in this mess.We are not sure of what further information we need to gather from Wescom. 1. The SEPP figures were computed on the 72T on the net webpage on 11/7/2006. I have the print out with the date and webpage info.2. My husband was 51 in in 2006.3. We had paper work from ATT stating that if he decided to take his pension in a lump sum the amount would be $327,057, at that time. This is the figure that was entered as the total IRA balance and SEPP plan.4. The reasonable interest rate on the paperwork is 6.03% (should we ask why this percentage)?5. The Actual investment rate on the paperwork is 8% (should we ask why this percentage)?6. The IRS penalty interest rate on the paperwork is 8.00 (same question).My husbands final day of employment was 12/17/06.We signed paperwork for Franklin on 1/12/07 for an amount of $1875 to be distributed on a monthly basis.An amount totaling $330,000 was deposited to Franklin on 1/17/07.The first distribution was made on 2/5/07.We are wondering if the plan was busted from the start should we continue to take distributions?Should we stop taking distributions and cut our losses by declaring that we owe the IRS 10% penalty on the distributions so far?2009-02-05 01:03, By: nicki, IP: [69.234.227.100]

L12: Change in investment IRAI have some very good news for you. Apparently,his will pass muster due to a large element of luck that allows this to fall into calculation parameters. This will not involve the AIG IRA in any way.The initial balance of 330,000 must be used. You cannot use a prior quoted balance in another type of retirement plan to fund a SEPP from the IRA rollover.However, if Ken quoted the correct interest rate of 5.70 asthe max rate AND based on the fact that your husband was 52 in 2007 if he was 51 in 2006, adjustment of the rate downward to 5.67 and using individual and not joint calculations – you get an annual distribution of exactly 22,500. Problem solved.Again, I do not know if this works because of luck OR the firm actually used these calcs and did not inform you of the new components resulting from the delay in implementation date.Since the plan is valid, you should obviously continue to take the distributions @ 22,500 per year. You can split that up quarterly, monthly or however as long as exactly 22,500 is distributed.You may want to go into the calculator on this site and enter those numbers to verify my conclusion and print it out so you will have a valid worksheet if the IRS ever inquires into his plan.2009-02-05 05:19, By: Alan S., IP: [24.116.165.60]

L13: Change in investment IRANicki:Thank you for providing the complete information so Alan could run the numbers for you. I agree that it looks like you have a good plan rather than a busted plan. If you follow Alan’s suggestion to run the numbers in the calculator on this site and print it out for your records, then you should not have problems in the future.With this new information it appears that you do NOT need to meet with anyone from Wescom. Just have a happy life.Alan, thanks for your analysis.Jim2009-02-05 15:45, By: Jim, IP: [70.167.81.119]

L14: Change in investment IRAThanks, Jim.A good portion of any credit should go to Ken, who earlier pulled up the basic #s and figured the correct distribution would fall just a few bucks short. The very small increase of only about 3,000 in the rollover amount was enough to offset the shortfall and produce the 22,500 annual figure. The election to take 11 months out in 2007 due to the Feb start date is proper.2009-02-05 17:39, By: Alan S., IP: [24.116.165.60]

L15: Change in investment IRAAlan,Thanks for the compliment. I always enjoy reading your posting and learning from your wealth of knowledge on this subject.I knew we could not unravel this matter until we had several specific questions answered. It is great that the initial $330,000 balance in the Franklin account (which can be proven from their first statement to Nicki’s husband as “beginning balance”) was enough to use as the basis for the calculations that match the $22,500 per year withdrawal with the other parameters that you listed.NICKI– Hang on to that FIRST Franklin/Westcom?IRA statementthatshows the$330,000 starting balance transferred into this newSepp IRA, and use this site’s SEPP/72T calculator to print out a new (correct) version of your plan that you keep for this plan.. BTW- the 8% figure you referenced as being used for the other interest rate, is just the one to estimate how much your investment will grow by each year, so it can “project’ the ending balance each year from the result of the payouts and the growth when it runs thecalcs, so it is not important. The REAL or ACTUAL interest rate is the one that needs Alan’s 5.67% rate (in the calculator on this site) for this to prove out your husband’s plan! KEN2009-02-05 21:41, By: Ken, IP: [68.160.6.114]

L16: Change in investment IRAKen. My humble apologies for not acknowledging your excellent work with most of the calculations to nail down this case. You’re right that Nicki should use the calculators on this site to document her actual SEPP Plan and hang onto all of the documents, especially the initial Confirmation from Franklin Funds to establish the starting account value. Alan did a great job … as usual … of fine tuning the situation to nail it down.That’s what’s great about this site: Everyone works together to get the best and most correct answer for the original questionner.Jim2009-02-05 22:33, By: Jim, IP: [70.167.81.119]

L17: Change in investment IRAKen,By the way, I note that the interest rates on this site now only go back 18 months, but I thinkwe used to show much older rates. Did you use the Fed site to pick up the 2006 rates or some other handier source?2009-02-05 23:02, By: Alan S., IP: [24.116.165.60]

L18: Change in investment IRAThank you for your help and advice:I put in the $330,000 as the beginning balance’ 5.67% as the reasonable interest rate; 8% and 8% as the actual and penalty rate; my husband’s age as 52. The payment came out as $22,500.01 per year under the ammortization method. Questions:1. Are these the right figures?2. Does it matter that Wescom told us that they used the annuitization method?3. Do we need to make sure we pay the 1 cent every year?I will ask Wescom if they can provide us with any information as to how they came up with the $22,500 per year distribution.1. How can I check that 5.67% was the correct rate in January 2007?Assuming that the SEPP are set up correctly and we won’t incur the 10% penalty on what we’ve withdrawn so far, I have a couple of other questions:1. As the stock market has declined so much and our account balance is now only $197,000, the percentage used to calculate expected growth of 8% is way to high. We would like to minimize our distribution. We have been advised that we can do this change one time, but that it is better to do it at the beginning of the year, based on the value of the fund at the end of the previous year. Is this possible?As we have already taken a distribution of $1875 for January, is it too late to make that change now?2. I am still a little nervous about this whole SEPP set up. Is it possible that the IRS could still come after us for the distributions we’ve taken?3. Would it be better to stop the distributions now and take the hit for the 10%, rather than continue to take distributions and then worry about paying the 10% in the future on a larger amount with extra interest added?2009-02-07 01:41, By: Nicki, IP: [69.234.204.19]

L19: Change in investment IRAYes, they are correct. The annuitization method produces a lower payment than the amortization method for the same balance and age.This link shows the historical 120% mid term rates. You can use a lower rate but not a higher rate. The max rate for either of the two months prior to Feb, 2007 is 5.70. That rate can apply even when you take monthly distributions despite the table headings. Reducing the rate to 5.67 yields exactly 22,500 with the amortization method for age 52.http://www.imagisoft.com/equal/federalmidtermrates.htmlThe plan can be re- documented using these #s as this is the only way to get to the amount that you have been distributing, ie 22,500. The IRS goes by the calculations permitted even if the original intent was different. That is why you should make copies of those calculations using the amortization method, age 52, individual and not joint and a 5.67% interest rate.Forget the penny. If you are within a cent, it is considered substantially equal.No harm in asking Wescom for their worksheets, just to see how they came to their figure. But the validity of the plan is between you and the IRS, not Wescom.With respect to the additional questions:1) If you can live with a substantial reduction in the annual payment, you could make the one time switch to the RMD method effective 1/1/2009. Just have the new payments adjusted to reflect that at least one and possibly two months have already come out at $1,875. Be aware that the annual amount must be recalculated every calendar year using the year end account balance, and the increased age. The distribution generated can fluctuate considerably using the RMD method, but it may drop too much in combination with the reduced balance as of 12/31/2008. It may drop by almost 2/3, so do not do it unless you can live with that amount of reduction.2) The IRS can ask anyone to justify their plan calculations. But if you can justify it and have taken the amounts correctly, there is no reason to be concerned.3) Definitely not. You can terminate the plan if you wish if you no longer need funds subject to the penalty, but if you do need to take withdrawals from this account, it would be wasting money when the plan qualifies as it is.2009-02-07 04:37, By: Alan S., IP: [24.116.165.60]

L19: Change in investment IRAAlan,I also noticed the shorter Fed Midterm history list. Perhaps Gordon can expand it to the way it used to be.. IGoogled it (FED 120% Mid Term Rate) and checked two sites for the older monthly Fed 120% midterm rates, and both showedthe same value of 5.70% for DEC 2006 and it was the best one they could use for FEB 07 first payment. First one was on IRS website, but you have to go to 2nd page to find the links to those older months.Here is another site that lists them:http://www.brentmark.com/pre59.htmNikki- ANSWERS IN BLACK CAPS…1. Are these the right figures?YES– YOU CAN DROP THAT ODDPENNY IN THE ANNUAL FIGURE& TAKE PMNTS THAT TOTALTHE $22,500.2. Does it matter that Wescom told us that they used the annuitization method?IF AMORTIZATION WORKS AND ANNUITIZATION DOES NOT. I’D STICK WITH SAYING IT WAS AMORTIZATION, SINCE THE IRS WILL NOT BE ASKING WESTCOM OR FRANKLIN TO PROVE THE WITHDRAWAL AMOUNT. THEY WILL BE ASKING YOU, FROM WHAT I HAVE HEARD. 3. Do we need to make sure we pay the 1 cent every year?SEE REPLY TO # 1– BUT STAY CONSISTENT EACH YEAR.I will ask Wescom if they can provide us with any information as to how they came up with the $22,500 per year distribution. I WOULD NOT BOTHER AT THIS POINT. I THINK ALAN HAS BACKED INTO THEIR MATH. THEY GAVE YOU A NOV REPORT, THEN THEY RECOMPUTED WHEN THE ACCT WAS ROLLED OVER AT LATER DATE, USING NEW BALANCE AND DIFF INT RATE (THAT WORKED FOR FEB 07 1st PMNT) AND AGE OF 52, AND IT SEEMS TO WORK, AS YOU PROVED WHEN YOU TRIED THE CALCULATOR.1. How can I check that 5.67% was the correct rate in January 2007? 5.70% WAS MAX FOR DEC 2006 (SEE THE TABLE I SHOWED ALAN ABOVE AND LOOK IT UP. THAT MAX RATE (OR A LESSER RATE) CCAN BE USED IN THE 2 MONTHS THAT FOLLOW, SO FOR FEB 2007 FIRST PAYMENT, DEC 06 MAX RATE WORKS.Assuming that the SEPP are set up correctly and we won’t incur the 10% penalty on what we’ve withdrawn so far, I have a couple of other questions:1. As the stock market has declined so much and our account balance is now only $197,000, the percentage used to calculate expected growth of 8% is way to high. We would like to minimize our distribution. We have been advised that we can do this change one time, but that it is better to do it at the beginning of the year, based on the value of the fund at the end of the previous year. Is this possible? THE GROWTH INTEREST RATE ONEIS OF NO VALUE EXCEPT IN “PREDICTIING” HOW LONG YOUR MONEY WILL LAST. IT HAS NO EFFECT ON YOUR WITHDRAWAL CALC. PUT IN REASONABLE RATE OF 0% THERE, AND YOU GET SAME WITHDRAWAL. YOU CAN MAKE A ONE TIME CHANGE TO “RMD” METHOD, AND EVEN AFTER TAKING FIRST FEW PAYMENTS, YOU CAN STILLSWITCH AND ADJUST OTHER PMNTS FOR REST OF YEAR, SO IN TOTAL2009 YOU GET THE RESULT OF THE RMD PAYMENT CALC FOR 2009. IT IS DONE ON SAME CALCULATOR,AND ONLY USES ATTAINED AGE, WITH NO RATES, AND YOU AHVE TO REDO IT WEACH YAER WITH NEW BLAANCE AND NEW AGE TILL YOUR SEPP ENDS AFTER AT LEAST 5 YRS (ALSO COUNTING THE YEARS ALREADY TAKEN BEFORE THE CHANGE) AND OVER 59 1/2 . IF YOU DECIDE TO TRY THAT POST YOUR RESULTSSO WE CAN CHECK THEM. USE THE 12/31/08 BALANCE TO COMPUTE ITFOR 2009. IT WILL BE VERY SMALLCOMPARED TO WHAT YOU WERE TAKING. USING AGE 54, and $197,000 RMD SHOWS A 2009 VALUEOF ONLY

$6,459.02/yr or[$538.25/mo]
1] Minimum Distribution Method FOR WHOLE YEAR. TRY IT…As we have already taken a distribution of $1875 for January, is it too late to make that change now?SEE REPLY ABOVE to #1–IT CAN WORK IF YOU HAVEN’T ALREADY TAKEN MORE THAN $6459.02 YTD.2. I am still a little nervous about this whole SEPP set up. Is it possible that the IRS could still come after us for the distributions we’ve taken? YES, BUT YOU SHD HAVE THE EVIDENCE TO WARD THEM OFF IF AUDITED…3. Would it be better to stop the distributions now and take the hit for the 10%, rather than continue to take distributions and then worry about paying the 10% in the future on a larger amount with extra interest added IT WILL COST YOU AT LEAST $4,500 in the 10% PENALTY thru Jan 2009 PMNT PLUS INTEREWST THEY CAN TACK ON. I WOULD SAY NO REASON TO DO THAT.2009-02-07 04:39, By: Ken, IP: [71.192.120.143]

L20: Change in investment IRAThank you again for your helpful explanation:I put in the 5.67% with my husband’s age at 52 and a beginning balance of $330,000. This gave me a distribution amount of $22,500.18 per year. I will print this out for our records.We will probably continue with this distribution for this year, as I work in education and do not know if I will have a job in June, or at least, the same income.At the beginning of next year we will probably change our distribution to MRD method. 1. I will enter the account balance at 12/31/092. I will enter my husband’s age as 553. Do I just leave the interest rate as it pops up on the day I use the 72(t) calculator on this site to calculate the MDR? or,do I use the interest rate I used at the time we began to take withdrawals in February 2007, ie 5.67%?to calculate the MDR.4. Once we change to the MDR method we have to recalculate the amount to withdraw each year based on the ending account balance at 12/31?2009-02-09 00:17, By: Nicki, IP: [69.234.202.242]

L21: Change in investment IRANikki,3. There is no interest rate employed for RMD method, just the attained age factor for the year of payments used along with the prev. yr end balance, when RMD method is employed to compute next year’s payment. You can leave the reasonable interest rate with the one that is displayed,but it doesn’t change the RMD payment amount no matter what it is. You can prove that by looking at RMD $ value for the plan you just did that came out to $22,500.18 for AMORT and then run it again with 0% interest rate in “reasonable Int rate” andrerunning your numbers– and you will see same RMD payment, but lowerAmort and Annuit payments will be shown.4. RMD calchasto be redone like that for each new calendar year, with newest yr end balance, and new age for next year in the new calcs.KEN2009-02-09 01:22, By: Ken, IP: [71.192.120.143]

L22: Change in investment IRAThank you for all your help. I think we now know how to proceed with managing our distributions under our 72t.I have a question about the general rules for withdrawing moneys from an IRA.Once my husband turns 59 1/2 and we can change our distribution pattern, or stop it all together until he turns 70 1/2. What does this mean?1. That he can take random withdrawals as and when needed?2. He has to set up a different plan to make withdrawals?I don’t understand what significance the age of 70 1/2 has to his IRA. We were under the impression that once he turned 59 1/2 we could use the IRA as we wished with no penalties.2009-02-11 03:05, By: Nicki, IP: [69.234.197.45]

L23: Change in investment IRA1. Yes, until required minimum distributions begin for the year he turns 70.5, he can take whatever amount he wishes out of the IRA or nothing. From the end of the 72t plan until RMDs, there is complete discretion and no penalty for early distributions. That ended when the 72t plan ended.2) Not applicableTraditional IRAs receive a tax deduction for contributions to encourage retirement savings to fund retirement years, not to provide an estate for beneficiaries. Therefore, for both IRAs (other than Roth IRAs) and qualified retirement plans, mandatory distribution must be taken for each year starting at 70.5, although the first one can be deferrred to April 1st of the year following the year 70.5 is reached. These RMDs start at about 3.7% of the prior year end balance and increase as a percentage each year. The factors assume joint and survivor life spans with a beneficiary up to 10 years younger. If you fail to take out the RMD, there is a 50% penalty applied to the amount that should have been taken, although the IRS will waive this for most logical reasons. IRA custodians provide assistance in calculating the RMD, but it is quite easy tofigure.If you want to avoid RMDs, you can convert your traditional IRA to a Roth IRA, but you should be able to pay the taxes on the conversion with separate funds. Earnings in the Roth are tax free in retirement and there are no RMDs. The trade off is the contributions are taxed before being made to the account. It is a good idea to maintain a combination of Roth and TIRA accounts as this provides more flexibility and is also a hedge against future tax increases caused by the mounting deficits.2009-02-11 04:54, By: Alan S., IP: [24.116.165.60]