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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: 10 year averaging Date: 12/29/1999 12:38 AM
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Any one who is turning 65 at this time was born prior
to 1936. It seems to me that more people of this age
should be looking at using a 10 year average of a lump
sum distribution. As I understand it, you average the
lump sum over a ten period and apply 1986 tax rates.
This is a tax strategy that is about to expire. Those
born after 1936 are degraded to a five year averaging.
I don't know why there isn't more comment about this.


The 10 year averaging for 65s isn't expiring, it's the 5 year averaging for 59 1/2s that quits this week. For large sums the 5 year was better than the 10 year.
There's several problems with it. IF you have to live off the money you are in a low income tax bracket making minimum payments and continued compounding tax deferred a better deal. It is only recently that tax managed index funds came to our attention as a good tax deferred vehicle. Also, who likes to pay taxes they don't have to?

You're right, tho. Your heirs could wind up with NOTHING from your pension with FET and ordinary income tax on it. For some reason a lot of tax advisors recommend rolling over your pension to an IRA without considering that a Lump Sum Distribution could be better if understood and handled properly. Ed
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