There are three ways that an early retiree can access their retirement funds: the fixed annuitization method is one of the ways of doing so without penalty before the age of 50.5. By dividing the balance of the individual’s retirement account by a specific annuity factor found in IRS tables, a payment can be determined. The annuity factor takes into account IRS mortality tables and an interest rate that must be less than 120% of the federal mid-term rate.
Once the payment has been determined by using the fixed annuitization method it can not be changed, except under special circumstances. Generally speaking the retiree can make one change in the subsequent year, and then the payments are made based upon the new determination.
Because each calculation method results in different payments it is critical that the individual go through the process of actually doing all the math. While the fixed annuitization method is considered the most complicated, it sometimes results in the highest payments. Higher payments mean a more comfortable retirement. Distributions are made monthly, quarterly or annually.
Under normal conditions people cannot withdraw funds from their retirement accounts until they hit the age of 59 ½. Any funds withdrawn prior to that point are assessed a 10% early withdrawal penalty. There are some special occasions that bypass the penalty. If someone is using the fixed annuitization method to access their retirement funds before the stipulated age and stops withdrawals, funds that have already been disbursed are then subject to the aforementioned penalties.