interest rate for july 72t distribution
What rate must I use to calculate the maximum distribution for beginning a 72t?
The following rates from the Rev Rul 2015-8 Table 1 are as follows:
July 2015 2.10% Monthly, June 2015 1.90%, and May 2015 1.81%.
Can I use the July rate for a distribution to begin on July 15, 2015? Thanks
-Lewis
Permalink Submitted by Alan - IRA critic on Wed, 2015-07-01 20:54
You can only use the rates from the two PRIOR months, not the current month. Therefore, for a July start, the max rate you can use is 1.90. You might consider waiting until August to start the plan since you know that you could use the 2.1% rate for an August start. In your first year you have the choice of taking out a pro rated amount based on the plan beginning month or the full annual calculation. So if you wait until August you can still take out the entire annual calculation for 2015 and use the 2.1% rate.
Permalink Submitted by Lewis Young on Wed, 2015-07-01 21:23
So if the annual amount is $12,000 and we begin in August 2015 We can go ahead and take out the 12,000 for 2015 and then begin $1,000 monthly distributuions (he wants monthly) in Jan 2016?
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-02 00:03
Yes. The distribution pattern (quarterly, monthly, random etc) can be changed at anytime. The vital requirement is that 12,000 shows on the 1099R for the total annual distributions, or 5,000 for 2015 if pro rating was chosen. One option is to take out 5,000 in August and then wait until December to determine if the additional 7,000 is needed or not. If there is any doubt about the 12,000 being sufficient in future years until the plan ends, then taking the additional 7,000 in December can be saved for insurance against higher expenses later on.