Installment

[Guest JimD]

Comments appreciated on how others handle installment payments from PS/401k Plans over period. As account balances change do you adjust installment amounts?

[LCARUSI]

It is becoming increasingly rare for plans to offer installment payouts. (at least in my experience).

But I've seen two ways of doing it:

1) Each year you pay 1/n of the remaining balance. For example, on a 10 year payout, you would pay 1/10 of the balance after 1 year, 1/9 after 2 years, 1/8 after 3 years and 1/1 after 10 years. The problem with this is that each payment tends to increase (assuming positive investment earnings). Butit's an easy methd to administer and explain.

2) Calculate each payment as if the account balance will earn a stated rate of interest for the remainder of the installment period AND then recalculate each year the amount of the payment. You stand a better chance this way of having more equal payments, but it is more complicated to administer and explain. EMAIL if you're interested and I'll fax you a sheet showing how it's done.