Payments are treated as “substantially equal periodic payments” if the amount to be distributed annually is determined by dividing the taxpayer’s account balance by an annuity factor (the present value of an annuity of $1 per year beginning at the taxpayer’s age attained in the first distribution year and continuing for the life of the taxpayer). The annuity factor is derived using a reasonable mortality table and using an interest rate that does not exceed a reasonable interest rate on the date payments begin.
The annuity factors calculated for the Annuitization Method are adjusted for the frequency of payments based on the table you have selected in the Pre-59½ Distributions window. The value of each payment is further adjusted based on whether payments are made at the beginning or end of each period.
When using the Annuitization Method, you need to select an Annuity Factor Table, and you need to enter a Reasonable Interest Rate.
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