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Interest Rates

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Bynick

L1: Interest RatesIn the 72t calculator it asks for a “reasonable interest rate” and an “actual investment rate”. What is the difference and how does that affect your calculation.2002-03-26 11:06, By: Nick, IP: [127.0.0.1]
L2: RE: Interest RatesReasonable Interest Rate – this is that rate used to determine the 72t payment. A safe rate to use is equal to 120% of the Applicable Federal Rate [AFR] for the month the first payment will be made. Current and past ARFs can be found on the interest rate link. This rate has nothing to do with the rate of return actually being earned.Actual Investment Rate – this rate is your best guess as to the true return on your investment and is used merely to see what may happen in the future. If your Actual Investment Rate is higher that the Reasonable Interest Rate then the fund will probably continue to grow even with the annual withdrawals. The reverse is also true.2002-03-26 14:05, By: Gfw, IP: [127.0.0.1]

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