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CoastMath models one series of substantially equal periodic payments from one traditional IRA or traditional 401(k). Each year of the series, the scheduled payment comes out of that account before spending is funded. It is ordinary income, and it carries no 10% additional tax.
While the series runs, the account is closed to every other withdrawal, so the projection never modifies the series. The series runs until the later of five years after it starts or the owner reaching 59½.
| Setting | How it’s used |
|---|---|
| Source account | A traditional IRA or traditional 401(k). A partner’s account runs on the partner’s age. |
| Method | Fixed amortization or the required-minimum-distribution method. Fixed annuitization isn’t offered. |
| Start age | A whole age from 18 to 59. Payments start in the owner’s birth month that year, or January if no birth month is on file. |
| Custom yearly payment ($; optional) | Blank uses the method above. An amount replaces the method’s payment; it keeps the exemption only if it matches what fixed amortization pays (see below). |
| Interest rate (%) | Used by fixed amortization, from 0% to 15%. Above 5% the panel shows the highest rate allowed for your first payment month: 120% of the federal mid-term rate for the two months before it, when that is higher than 5%. |
Both methods use the owner’s life expectancy from the IRS Single Life Table: fixed amortization at the age reached in the first year of the series, the required-minimum-distribution method at the age reached in each payment year.
Fixed amortization payment=Balance×rate1 − (1 + rate)−life expectancy
Computed once, in the first year of the series, and repeated unchanged every year.
Required-minimum-distribution payment=Balance÷Single life expectancy at this year’s age
Recalculated every year, so it moves with the balance and the owner’s age.
| Balance | $500,000 |
|---|---|
| Single life expectancy at 50 | 36.2 |
| Fixed amortization payment$500,000 × 0.05 ÷ (1 − 1.05^−36.2) | $30,156.12 |
| Required-minimum-distribution payment, first year$500,000 ÷ 36.2 | $13,812.15 |
The projection computes the payment from the account’s balance at the end of the year before the series starts, before that year’s growth. In a series that starts in the plan’s first year this is today’s balance, so the panel’s preview matches the projection. The required-minimum-distribution method uses each prior year-end balance.
Only the amounts that come from an approved method qualify for the exemption from the additional tax. A Custom yearly payment is checked against the fixed amortization payment for the same balance, age and rate. If it matches within a dollar, the series keeps the exemption. If not, the payment is still taken every year as income, but it is treated as an ordinary early withdrawal and the 10% additional tax applies. The preview says which case you are in and shows the approved payment.
- A custom amount can be validated only for fixed amortization, at a rate no higher than the greater of 5% and 120% of the federal mid-term rate for either of the two months before the first payment. CoastMath includes the IRS monthly rates from January 2024; for a first payment whose two prior months are not included, it validates rates up to 5% only. The required-minimum-distribution method changes every year, so a fixed custom amount never matches it.
- The check is made once, in the first year, from the balance the payment is based on. The same payment is then repeated every year.
- If the account cannot pay the series in some year, CoastMath warns that this would modify the series. A modification can end the exemption and add a retroactive charge, which is not modeled.
Payments are treated as monthly installments from the start month through the month before the later of the fifth anniversary and 59½. A first or final calendar year that is only partly inside that span pays only its share.
- Fixed amortization
- Required-minimum-distribution method
No birth month on file, so the series starts in January at 50 and its last payment month is June of the year the owner turns 59. With growth assumed, the required-minimum-distribution payment rises with the balance instead of drifting down.
Show data
| Age | Fixed amortization | Required-minimum-distribution method |
|---|---|---|
| 50 | $30,156 | $13,812 |
| 51 | $30,156 | $13,773 |
| 52 | $30,156 | $13,773 |
| 53 | $30,156 | $13,732 |
| 54 | $30,156 | $13,690 |
| 55 | $30,156 | $13,646 |
| 56 | $30,156 | $13,646 |
| 57 | $30,156 | $13,555 |
| 58 | $30,156 | $13,508 |
| 59 | $15,078 | $6,730 |
| 60 | $0 | $0 |
| Start age | Required through | Why |
|---|---|---|
| 50 | The month before 59½ | 59½ comes after the fifth anniversary |
| 56 | The month before 61 | The fifth anniversary comes after 59½ |
After the series ends, the account returns to the drawdown order and has no further additional tax, since the owner is past 59½. The series also stops if the account runs out or the owner dies.
During any calendar year that contains a series payment, the account is skipped when a shortfall is funded and when it is chosen to pay a specific expense. Other accounts cover those needs, in the order described in How shortfalls are funded.
Each payment appears as income named SEPP 72(t) in the year’s cash flow and is taxed as ordinary income. Traditional withdrawals from other accounts before 59½ are still charged the additional tax; see Early withdrawal penalties and Roth ordering.