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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 75777  
Subject: Re: 5 vs. 10-yr averaging Date: 6/14/1999 1:06 AM
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I am eligible to opt for either 5 or 10-year averaging on my 401K's (no
LTCG). Did I hear that after 1999 there will no longer be an option?


I'm not sure about that.

Also the amount involved indicates that 5-year averaging is advantageous today.
In two or three years will 10-year averaging taxes change significantly
(will max rate decline)?


I don't think anyone can predict that with accuracy.

Also is it better to wait 5-6 years when minimum
withdrawels are required? Tax rate will be 28%
on required minimum withdrawels.


You can Lump Sum Withdraw about $300,000 at an average tax bite of 22.6%. Depending on your assumptions on growth, need for the funds, possibility of a tax free step-up basis at death, no estate tax on the prepaid 4972 tax, and tollerance to invest in a tax managed growth fund, and tollerance of paying a lot of taxes now, the lump sum withdrawal might be more advantageous. If so, Don't wait as the funds will grow, increasing the current tax.

If you need the funds to retire on, and want to play daytrader with the funds, convert them to a self-directed IRA and withdraw only the minimum each year. Ed
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