In 2002 the IRS issued a ruling that allows
early distributions from retirement accounts without
being penalized if those distributions are "part of
a series of substantially equal periodic payments"
The payments are annual
and must continue for 5 years or until the age of 59 1/2
is attained, whichever is the longer
period. See Rev. Rul. 2002-62 on the www.treasury.gov web
These distributions are calculated base
on three methods,
1. Required minimum distribution method,
2. Fixed amortization method, and the
3. Fixed annuitization method.
Methods 1 and 2 utilize Life Expectancy
Tables and method 3 utilizes a mortality table.
Methods 2 and 3 result in a fixed yearly distribution
while method 1 results in a distribution that varies from
year to year.
There are three tables that may be used
to determine your annual distribution.
Note: Once you have chosen a table and
begin distributions you should not consider changing
either the method or the table without professional
Single Life Table
This table produces the highest distribution. It
does not take into account the age of your
beneficiary.The Single Life Table may be used by anyone.
Joint Life Table
This is a table to determine joint survivorship. Married
couples have the option of choosing this method as long
as their spouse is the beneficiary on the retirement
account. Married couples do not have to choose this table
-- it is only an option.
Uniform Life Table
This is the same table the IRS created to simplify the
Required Minimum Distribution (RMD) requirements. It also
does not use the age of the beneficiary. This table can
be used regardless of marital status or selected
Each year this method calculates a distribution by
dividing your current account balance by the life
expectancy value determined by the table chosen and
current age. The distribution varies each year.
This method calculates an annual distribution by
amortizing your account balance over the life expectancy
value from the chosen table. The distribution does not
vary from year to year.
This method uses an annuity factor to calculate the
distribution. The distribution calculation is defined by
the Treasury Department as "The annual payment is
determined by dividing the account balance by an annuity
factor that is the present value of an annuity of $1 per
year beginning at the taxpayer's age and continuing for
the life of the taxpayer." This method does not use
the age of the beneficiary,
The J&L Rule 72T Calculator uses the Annuity
Mortality Table referenced in the Department of the
Treasury Rev. Rul. 2002-63.
Under certain circumstances you can change your
distribution method one time. You should seek
professional advice or consult with the IRS before
considering any changes once a distribution has taken