IRS has certain rules regarding premature withdrawal of retirement funds. A ceiling has been placed adjoining the future rate, limited to 120% at best, of the Federal Mid-term rate while going beyond this limit will charge the beneficiary with additional penalties. These rules are described in 72(t) and 72(q) sections of the Internal Revenue Service (IRS) code and are very hard to understand that you should discuss them with a professional financial advisor. This code ensures that the retirement fund is not exhausted impulsively. This calculator will show you the yearly distribution amount as per the 72(t).
Distribution interest rate
This is also known as the reasonable rate of interest for 72(t) distribution. As per the IRS rules, the rate can’t go beyond 120% of the Federal Midterm rate for any of the preceding two months. An example should clear the concept. Suppose the distributions started in December of 2013. In this case, the distribution interest rate would be equal to or less than 120% of any of the preceding two months (November, 2013 or October, 2013) Federal Mid-term rate. Please, click herefor detailed information.
Projected earnings rate
It’s your expected rate of return from the retirement savings account.
Enter the account balance of the retirement account as it was on the closing date (31st December) of previous year.
Mention your present age here.
Current age of the retirement account’s beneficiary. Ignore this field if your SEPP or Substantially Equal Periodic Payments are calculated using the Joint Life Expectancy table.
Choose life expectancy table
As per the IRS rule, the SEPP is calculated using different life expectancy tables. Choose the one applicable for you among the Single Life Expectancy, Uniform Life Expectancy, and Joint life expectancy tables.
Choose distribution method
This calculator uses three methods to calculate the amount of distribution that will allow you to withdraw funds without paying 10% premature distribution penalty until your age turn 59 years and 6 months. Choose the applicable one from the Required Minimum Distribution, Fixed Amortization Method, or Fixed Annuitization Method, and the appropriate adjustments will automatically be made by this calculator.
Post 72(t) distribution
Percentage amount that indicates the amount you want to receive annually after the 72(t) or 72(q) distribution takes place.