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Interest Rate Confusion

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Bymdargo

L1: Interest Rate ConfusionThis website’s calculator defaults to 3.81%. But the 6/04 rate you estimate to use for SEPPs is 4.64% (IRS 120% = 4.67%). Why the difference between 4.67% and 4.64%? Why does the site default to 3.81%? I am going to begin SEPPs this month (6/04). What rate should I use in conversations with my custodian? I need interest rate clarification. I am electing the amortization method. I will be 55 in 8/04. I love this site and I am so glad I read about you in Newsweek! Thank you! mdargo2004-06-12 11:45, By: mdargo, IP: [24.20.18.32]
L2: Interest Rate ConfusionThe correct June, 2004 interest rate is 4.67% (which is 1st available for use effective July 1st). BTW, the July rate (which can 1st be used 8/1/04) will go up further to approx. 4.90%.
I didn’t realize this websiet got a write-up or mention in Newsweek. Can you tell me which issue?
TheBadger
wjstecker@wispertel.net
2004-06-12 11:56, By: TheBadger, IP: [66.250.23.21]

L2: Interest Rate ConfusionI am still a bit confused. So, why is 4.64% posted on the site, if the rate to use now is 4.67%? What interest rate should I use if I elect payments to begin on 6/15/04? 3.81%? Use 4.67% or 4.64% for 7/1/04 payments? Sounds like I should wait until 8/1/04 to begin payments in order to get what is now estimated to be 4.9% as the July 2004 published rate?2004-06-12 12:16, By: mdargo, IP: [24.20.18.32]

L2: Interest Rate ConfusionThe ”Our Estimate” column is the estimated interest rate based onthe forumlas currentlyused to determine the next 120% Mid-Term rate. We include the column only so that previous estimates can be viewed relative to the actual published rate.
Revenue Ruling 2002-62 and Qualified SEPP Plans post 12/31/2002 – The interest rate that may be used is any interest rate that is not more than 120 percent of the federal mid-term rate for either of the two months immediately preceding the month in which the distribution begins.
The calculator defaults to the maximum rate for the current month. 4.67% if for a plan initiated in July. 4.64% was the estimated that we ublished prior to when the rate was released by the IRS.2004-06-12 13:58, By: Gfw, IP: [172.16.1.74]

L2: Interest Rate Confusionmdargo…
BTW – I would also like to know what you read in Newsweek. Usually I get contacted prior to any print mention.
FYI – The site will also be highlighted in the July, 2004 issue of Ed Slot’s IRA Newsletter.
Gfw2004-06-12 14:02, By: Gfw, IP: [172.16.1.74]

L2: Interest Rate ConfusionThanks for clarifications! I think I get it now…. mdargo2004-06-12 14:21, By: mdargo, IP: [24.20.18.32]

L2: Interest Rate Confusionhow do I get in touch with Ed Slot to subscribe to his IRA newsletter? thanks2004-06-14 08:29, By: john, IP: [24.176.74.63]

L2: Interest Rate Confusionhow do I get in touch with Ed Slot to subscribe to his IRA newsletter? thanks2004-06-14 08:29, By: john, IP: [24.176.74.63]

L2: Interest Rate ConfusionBased on the discussion about “If you wait till XXX to start your SEPP, the rate will be higher and you can get more money,” reminds me of the “hot roll” story which I think is appropriate at this time.
A gentleman was attending a formal dinner, and the meal had just been served. The basket of rolls was passed around and, when it came to this particular person, he passed the basket and announced that he would “wait for hot rolls” to be brought out later. Half way through the meal the waiter brought a new basket of rolls. However, this person again passed the basket saying hebelieved the rolls were not hot and he would wait until a fresh basket were brought out. At the end of the meal, another basket of rolls came out and again this person passed them by. So the meal ended and everyone went home, and this guy never got a roll, hot or cold.
Moral of the story is that you must decide at some point to begin taking distributions and work with whatever interest rate you have. There never is a “perfect time” to do anything … you just have use the information you have and make the best decision you can whenever you choose to make that decision. If waiting is not a problem for you then wait. If you need to get money coming in sooner, then either take a “premature distribution” and pay the penalty, then wait for a more favorable time to start SEPP.
Good luck.
Jim2004-06-14 08:31, By: Jim, IP: [68.225.115.136]

L2: Interest Rate Confusionmdargo, what badger is trying to help you see is that the key to 72t is to utilize(tie up)as little of your IRA assets as possible to create the income you need. and keep the remainder flexible for unexpected changes in your circumstances. the only variable you have in your calculations is the rate of IRS acceptable interest which this site so graciously tries to anticipate and predict. and that is climbing. if by waiting til july to start taking your distributions you can reduce the assets committed to the SEPP by 10% roughly and if you wait til august another 2.5%. it can give you much more flexibility down the road. the key is committing onlythe minimumyou need to get the income you want. use the reverse 72t calculator to input your specific circumstances and it may become evident of the benefits to wait. 2004-06-14 08:35, By: ralphccbi, IP: [12.107.192.130]

L2: Interest Rate ConfusionThis is the link to Ed Slott’s site.
Jim
http://www.irahelp.com/index.shtml2004-06-14 08:36, By: Jim, IP: [68.225.115.136]

L2: Interest Rate ConfusionGuess which site is in the #1 position of Ed Slott’s “Favorite Sites” links on his web site? Times up. It’s, “72t.net.”
Jim2004-06-14 08:43, By: Jim, IP: [68.225.115.136]

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