Based on the information provided, this report shows the allowable annual 72(t) withdrawals based on the three IRS-approved methods. For purposes of this report, the distribution amounts are shown as annual figures. However, distributions may be made monthly, quarterly, or semi-annually. This 72(t) Calculator is intended to serve as an informational tool only, and should not be construed as legal, investment, or tax advice. You should discuss your situation with your financial planner or tax advisor before acting on the information provided by the 72(t) Calculator, and to identify specific issues not addressed by the Calculator.
This report has been provided by DST Retirement Solutions, LLC, an SS&C company
Payments can begin at any time, for any reason. The rule requires the series of substantially equal periodic payments to last for at least five full years OR until the IRA owner reaches age 59½, whichever is longer. For example, if payments began at age 56 on December 1, 2014, an investor may not take a different distribution or alter the payment amount until December 1, 2019, even though your fifth payment was taken on December 1, 2018.
Any changes to the payment amount prior to meeting the required distribution period may result in a 10% penalty tax plus interest applied retroactively to all previous payment amounts.
The IRS has approved three acceptable calculation methods to determine the required dollar amount of the series of payments:
Required minimum distribution (RMD) method: This is the simplest method and typically results in the lowest required
payout amount. The current value of the IRA is divided by a life expectancy factor. This is the only method that is recalculated every year, therefore the payment amount changes annually as the account value changes.
Fixed amortization method: The required distribution amount is determined by amortizing the account value over
a life expectancy assumption and a reasonable interest rate factor. This calculation sets a fixed dollar amount to be distributed each year.
Fixed annuitization method: This method applies an annuity factor and a reasonable interest rate assumption to
calculate a fixed annual required distribution amount each year based on life expectancy.
The results of the 72(t) Calculator may vary with each use and over time. The Calculator’s results may change over time due to updates to the Calculator or because of changes in your personal circumstances. For those who have chosen the RMD method for the 72(t) payment, they may find it helpful to return to the Calculator at least annually for updated results.
Reasonable interest rate
The IRS requires the interest rate used for 72(t) payments to be the greater of 5% or less than or equal to 120% of the federal mid-term rate for either of the two months immediately preceding the month in which the distribution begins. Recent applicable annual 120% federal mid-term rates are: 5.04% for September 2023, 5.33% for October 2023 and 5.65% for November 2023.
Life expectancy tables
There are three different life expectancy tables that the IRS allows when calculating your 72(t) withdrawal with the fixed amortization or RMD method. It is important to note that once a distribution method and life expectancy table have been chosen, they cannot be changed throughout the course of the distributions, except for a one-time change from the annuitization or amortization methods to the RMD method. The three life expectancy options are:
||This is a life expectancy table developed by the IRS to simplify minimum distribution requirements. The uniform lifetime table does not use a beneficiary’s age to determine the resulting life expectancy. This table can be used by all account owners regardless of marital status or selected beneficiary, however, it is generally used by an unmarried owner, an owner whose spouse is not the sole beneficiary, or an owner whose spouse is not more than 10 years younger.
|Single life expectancy
||This is a life expectancy table that also does not use a beneficiary’s age in the calculation. This table can be used by all account owners regardless of marital status or selected beneficiary. Choosing single life expectancy will produce the highest payment of the three available life expectancy tables.
|Joint life expectancy
||This is a life expectancy table that uses the account owner’s age and oldest named beneficiary’s age to determine the combined life expectancy. It is generally used by a married owner whose spouse is both more than 10 years younger and the sole beneficiary of the account.