Annuity Factor Method

The annuity factor method is what you’ll use to determine how much you’ll pay in penalties if you bust open your IRA at an early date.

So, you just learned that you’ve got one year to live and you want to be sure your last breath has no stench of regret (woof...this one got dark quickly). You’re going to take 25 grand out of your IRA to run with the lions and swim with the dolphins. Well, remember that first you’ll have to pay ordinary tax on that money, so that 25 grand just magically became 17.5 after federal and state taxes are done with you. Then, you have to tack on the early withdrawal penalty, which you’ll find by referring to mortality tables listed by the IRS, which is where the annuity factor method comes into play.

Guess you'll be renting a couple fewer lions to run with...