The Problem...
Retirement plan accumulations are continuing to grow. For many years the tax laws have encouraged the use of tax qualified plans to accumulate substantial retirement assets. These funds have accumulated and are now subject to a variety of taxes and penalties. Since there is no way to really avoid the tax, the next best possibility is to prepare for the tax in an attempt to reduce the overall impact.
Pre-Mature Distribution Tax |
You can't count on these assets for emergencies. In addition to the regular income tax, this 10% penalty tax is imposed on distributions that occur prior to the account owner's age 591/2. |
The Solution... The only solution is to plan for the possibilities. For example, certain distributions can occur prior to the age of 591/2 free of the 10% pre-mature penalty tax. The 72tTool program lets you calculate the three acceptable methods outlined by the Internal Revenue Service in IRS Notice 89-25 for making these penalty-free distributions. If future projections show that accumulated assets will encounter excessive tax, maybe distributions should begin now.
Pre-Age 59 ½ Penalty Free Distributions
IRS Notice 89-25 provides three possible methods of avoiding the pre-age 59 10% penalty tax. The methods are defined as:
 | Life Expectancy Method - the total fund value divided by life expectancy; or, |
| Amortization Method - the total fund value amortized over life expectancy; or, |
| Annuity Factor Method - the total fund value annuitized over life expectancy. |
Regardless of which method is used, the choice of the interest rate to be used in the calculations is critical. It must not exceed a reasonable rate on the date the payments commence.
Once selected, the level payment must be continued until the later of age 59 ½, or five years. If the payment is changed, all prior penalties that were avoided will become due and payable in the year of the change. The results of the three methods will vary. 72tTool can make the calculations for you and put the results in easy to understand reports.
Does the entire account have to be amortized – not according to IRS Notice 89-25, that’s why 72tTool allows you to amortize only a seqregated portion of the account and allow the balance to accumulate to retirement.
For calculations associated with Substantially Equal Periodic Payment Plans, check out 72tTool from yyyZ, Ltd. -- it can highlight the problems and let you offer possible solutions.
System Requirements
The minimum recommended system configuration is a Pentium computer operating Windows 95 or Windows NT
The Price
72tTool is priced at $45