dgpcolorado
high altitude member
The method you use, and the amortization rate, needs to be "reasonable." Back twenty-two years ago I was able to use 6% because interest rates were a lot higher back then. The base method, using life expectancy tables, would have given me too little to live on. The amortization method was what made it work for me. Back in 1999-2000 it was also possible to buy thirty year TIPS for about 4% plus inflation and Series I savings bonds for as much as 3.6% plus inflation. Things are a lot more difficult now with interest rates so low on low risk places to park cash reserves.An interesting note on the 72t (SEPP). The wording that outlines how you can take money out only speaks of 3 methods RMD, annuity and amortized. However, if you read closely, those are just examples. You can come up with your own method but will need to run it by the IRS.
I was thinking of doing this when I started my 72t because it was right after Covid hit and the mid term AFR rate used for two of the calculation method had dropped from something like 2.26% to .52%. I was considering using the 2.26% rate and explaining to the IRS that this AFR rate collapse was a short term occurrence and would resolve itself. In the end I decided not to go this route because I figured it would delay my retirement. In the end it really doesn't matter since I'll be switching to RMD this year.
The trick with SEPP is that you absolutely have to keep the withdrawals on track until age 59½, no matter what. The consequences of messing up are severe. SEPP is only for a detail oriented person, IMO.