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Those of you retireing early(55+) with a larger traditional IRA(>$1 mil) and with plans to minimize taxes for your heirs may want to consider taking a more aggressive(>8%) withdrawal program?!

This takes for granted that you plan to deplete your IRA before your demise(ideally the day before) to avoid a "possible higher tax" rate for your heirs. Estate taxes are onerous so we all need to have an estate plane to avoid these taxes.

Another facet of this >8% withdrawal strategy is to plan to save a portion of the IRA withdrawals to either gift($10000 tax free) to each of your children, grandchildren... or use as income in later years to minimize future taxes in higher income years.

Note that those of you under 65 can withdraw money from a traditional IRA without a penalty by annuitizing withdrawals(IRS Code 72(t)).

Anyone out there know of any alogrithms to plug numbers into to determine these types of withdrawal scenarios.
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Note that those of you under 65 can withdraw money from a traditional IRA without a penalty by annuitizing withdrawals(IRS Code 72(t)).

under 59 1/2 (not 65)

Anyone out there know of any alogrithms to plug numbers into to determine these types of withdrawal scenarios.

annual distribution amount = account value / your annuity factor.


Your annuity factor = (1-(1/(1+r)*L)/r
where r is the interest rate assumed
and where L is your life expectancy

(*L means "taken to the power of the life expectancy"; I wasn't sure of the proper way to indicate an exponential factor with the keyboard!)
Calculations easy with the computer :~)


Another method of taking accelerated early IRA distributions is the amortization method, which seems to me similar to the annuity method. The third approved method of calculating SEPPs (substantially equal periodic payments) is the life expectancy method, which permits early withdrawals from the IRA but not accelerated as with the amortization and annuity methods.

WTR


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(*L means "taken to the power of the life expectancy"; I wasn't sure of the proper way to indicate an exponential factor with the keyboard!)
Calculations easy with the computer :~)

____________________

<SHIFT 6> on my keyboard yields ^. This is the notation used in Excel. * is used for multiplying.
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<SHIFT 6> on my keyboard yields ^. This is the notation used in Excel. * is used for multiplying.

Thanks for your reply. It's a pain trying to write formulas with a keyboard, especially when you don't know the conventions!

WTR
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annual distribution amount = account value / your annuity factor.


Your annuity factor = (1-(1/(1+r)^L)/r
where r is the interest rate assumed
and where L is your life expectancy


Let me also add that r (the assumed rate of interest) needs to be expressed as a decimal (e.g., 5% is .05) in this calculation.
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You might want to take a look at the Retire Early Home Page. It's got a calculator for the life expectancy and amortization methods.
http://www5.geocities.com/WallStreet/8257/reindex.html
-Chester :)

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