Payments are treated as “substantially equal periodic payments” within the meaning of § 72(t)(A)(iv) if the amount to be distributed annually is determined by amortizing the taxpayer’s account balance over a number of years equal to the life expectancy of the account owner or the joint life expectancy and last survivor expectancy of the plan owner and beneficiary at an interest rate that does not exceed a reasonable interest rate on the date payments begin. Life expectancies are determined in accordance with proposed §1.401(a)(9)-1 of the regulations.
The Amortization Method uses the standard financial formula for amortizing a balance over a given period. This formula incorporates both the frequency of distributions and when (in each period) the distribution is made.
When using the Amortization Method, you need to enter a Reasonable Interest Rate.
