72(t)
I am using 72t.net for a SEPP calculation and have a question regarding the reasonable interest rate. It says the published 120% mid-term rate is 1.53% for the month beginning 12/01/2011. Does that mean I can use up to 120% of 1.53% for the calculation under the amortization or annuitization method?
Thank you.
Permalink Submitted by Alan Spross on Mon, 2011-12-05 23:42
No.
The site publishes the actual 120% rate. 1.53% IS the max rate you can use for a plan starting in either January or Feb, 2012. If you start the plan this month, you cannot use the Dec rate.
In some cases it might be wise to start the plan this month. For example, due to the interest rates being so low the calculation may not generate enough of an annual distribution to cover expenses over the entire length of the plan. In that case, if you start the plan this month you can take out an entire annual payment (12 months worth) this month and save some of that money to subsidize any shortfalls later on that might cause you to bust the plan. Of course, you must also account for the added income taxes due next April if you take out a full year’s worth this month.