I was looking at an on-line calculator. It is asking for an anticipated rate of return and a reasonable rate of return.
I understand that the substantially equal payment is based on the "reasonable rate" (nte 120% of federal mid term rate). But not sure why there is an anticipated int. rate requested or how that applies in determining the payment. Any ideas? Thanks.
Full Version: Interest Rate assumptions for computing subs equal pmts
QUOTE (MarZDoates @ Jan 10 2008, 10:52 AM) 
I was looking at an on-line calculator. It is asking for an anticipated rate of return and a reasonable rate of return.
I understand that the substantially equal payment is based on the "reasonable rate" (nte 120% of federal mid term rate). But not sure why there is an anticipated int. rate requested or how that applies in determining the payment. Any ideas? Thanks.
I understand that the substantially equal payment is based on the "reasonable rate" (nte 120% of federal mid term rate). But not sure why there is an anticipated int. rate requested or how that applies in determining the payment. Any ideas? Thanks.
Part of th calculation estimates the value of the account after the withdrawal. If your using the RMD method the projected year end value will have a bearing on each years calculation. ( but its only an estimate. actual balances must be used) If you're using one of the other two methods which produce equal payments it mearly projects the annual balances for informational purposes only.
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