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Rule 72T Calculator

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" (SEPP).

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 site.

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.


Tables

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 advice.

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 beneficiary.

Methods

Minimum Method
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.
Amortization Method
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.
Annuity Method
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.

IMPORTANT:
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 effect.

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