life expectancy tables
L1: life expectancy tablesI am presently 57 and I want to start a 72(t) early distribution using SEPP.In attempting to get my official life expectancy, several FAQs referenced appendix A of revenue ruling 2002-62 for that number. After considerable effort, I found that document with appendix A included on the IRS web site. I also found a life expectancy table from IRS publication 590. The difference in these two tables is over 10 years. The first table gave me an answer of 39.7 years, while the IRS 590 document gave an answer of 27.9 years.
My question is does anybody understand the difference, and can I use the smaller number of 27.9 years? This number also seems consistent with other non government site publications for my age of 57 in 2011.
My second question is whether it is acceptable to use the EXCEL financial function of PPMT to do the amortization calculation? Several web sites imply that one should use the “official government calculator” which I am unable to locate.2011-04-06 21:01, By: chasman, IP: [22.214.171.124]
L2: life expectancy tablesThere is no official government calculator, so you can stop looking. Start by playing with our calculators on our website and your questions about the difference in life expectancy will be answered. The difference in the tables is that one is a single life table and one is a joint life table. Based on your question, I strongly suggest that before you do anything, you start reading the informationon this website and perhaps Bill’s book. You may even come to the conclusion, that at age 57, you shouldn’t start a SEPP as you will be locking yourself in for the next 5 years.2011-04-06 21:13, By: Gfw, IP: [126.96.36.199]
L3: life expectancy tablesThank you for your suggestions. I understand that I would be locking in for the next 5 years. I also agree that early withdrawal must be carefully considered.I believe I have done so, and it might be useful to share my reasonning for considering the early withdrawal.
1.) I am unemployed, albiet by good fortune as my choice. My liquid non IRA assets are now less then a years worth of expenses. I am at the point of either the need to liquidate physical assets in my control or an early withdrawal from my IRA. I need to pick one of these two options, assuming I do not get a job.
2.) My ratio of IRA/non IRA assets is roughly 15 to 1(not including my home). My desire is a smaller ratio of assets held under the IRA custodial agreement.
3.) I am holding an overwieght portion of my IRAs in physical assets. The early withdrawal allows me to move an increased portion of those to my direct control. This allows some increased flexibility for managing those assets.
2011-04-07 16:45, By: Chasman, IP: [188.8.131.52]
L4: life expectancy tablesUnlike most taxpayers, it sounds like you plan to use the 72t to take out more than your living expenses, ie to remove assets penalty free to increase your relative holdings in taxable accounts. No problem there, it is just fairly rare. In fact, since you would be taking out more than you need to live on, there is less chance of having to bust your plan if your expenses increase.With respect to your holdings, are you using a self directed IRA custodian, eg because you are holding real estate or other non conventional assets in your IRA? If so, that factor does introduce some added risks in the form of prohibited transactions, UBIT taxes, assets owned jointly by you and your IRA and 1099R valuation concerns. These risks exist prior to the 72t plan, but in combination introduces more moving parts to the plan.Finally, remember that your IRA assets have protection against creditors to one degree or another, whereas these assets lose that protection after distribution.2011-04-07 19:36, By: Alan S., IP: [184.108.40.206]
L2: life expectancy tablesYou should definitely consider gfw’s points, but here is some additional perspective on the divisors you referenced.The 39.7 is developed by using a joint life expectancy of yours at age 57 and an assumed beneficiary age 47. That same divisor is shown if you use the joint lifetable in Pub 590 using the intersection of ages 57 and 47.The 27.9 divisor is the Pub 590 single life table figure and recognizes only your own life expectancy. Using the lower divisor will generate a higher SEPP payout per dollar of account balance and is therefore the recommended table to use. The excess account balance you do not need should be transferred to a non SEPP IRA before you start your plan and that other IRA can be used for emergency needs or perhaps to start a second independent SEPP later on.The reason that the Uniform Table in Pub 590 starts at age70isbecausethe IRS was only concerned with IRA RMDs and did not want to bring detailed SEPP related subjects into that Publication. Should the IRS Release a dedicated Publication for SEPP plans?Probably.Will they? Don’t hold your breath!2011-04-07 00:40, By: Alan S., IP: [220.127.116.11]
L3: life expectancy tablesThank you for your clarity in answering my questions on life expectancy. Your example is extremely useful, and I clearly will not be holding my breath for the dedictated publication.2011-04-07 15:33, By: chasman, IP: [18.104.22.168]
L2: life expectancy tablesHello Chasman:
The official font of all life expectancy knowledge is IRC Reg. 1.401(a)(9)-9. The values from this source are then repeated in dozens if not hundreds of places including Pub 575 and 590; Rev. Rule 2002-62; this website and many others.
In short, your single life expectancy for SEPP computational purposes is 27.9. Any other number is incorrect.
You may use the Xcel “=PMT” function or the Lotus “@pmt” function and you will get identical distribution amounts as would be obtained using the calculators at this website all of which are correct and balance to IRS written calculation examples. All of these calculators are technically known as the “amortization in arrears” computation.
2011-04-07 13:54, By: TheBadger, IP: [22.214.171.124]