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My wife and I will both be 70 1/2 this year and thus required to make a withdrawal from my 401K. I will elect to have her as my beneficiary and use the joint life expectancy table to determine the divisor. But now I have to choose to either recalculate each year or choose term certain. Each has it's advantages and disadvantages.
Recalculation enables us to stretch out smaller payments over a longer period of time and would seem like the obvious choice since we have no immediate need for the money. But if she predeceases me, my heirs, at the time of my death, would be forced to receive the entire remaining balance in one lump sum the next year and that could be a considerable 7 figure amount. The tax consequences would be formidable.
Term certain would guarantee an almost 20 year payout regardless of the order of our deaths but the payments would be larger and for a shorter period of time.
The question is - which to choose. Any thoughts?
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