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    ctromm's Avatar
    ctromm Posts: 1, Reputation: 1
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    #1

    Oct 21, 2016, 05:00 AM
    Why age 591/2 and not 60
    Why is it age 59 1/2?and not any other age like 60 or 62?
    ma0641's Avatar
    ma0641 Posts: 15,681, Reputation: 1012
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    #2

    Oct 21, 2016, 05:50 AM
    There is no reason. Some IRS wonk wrote it into the regs. Same for the 70 1/2 rule for RMD.
    ebaines's Avatar
    ebaines Posts: 12,129, Reputation: 1307
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    #3

    Oct 21, 2016, 07:26 AM
    I've not been able to find a logical reason for these numbers, but my guess is that they evolve from creating a retirement window centered on age 65 (the traditional retirement age). In setting rules for IRAs back in the early 80's I suspect that they wanted a equal time intervals for (a) the time from when you could start taking voluntary distributions without penalty to the standard retirement age, and (b) the time from standard retirement age to when mandatory distributions must start. Why they picked a window that is 11 years wide (59-1/2 to 70-1/2) as opposed to a ten years wide window (60 to 70) is not clear. It may be that setting the mandatory distribution age as April 1 of the calendar year following the year you turn 70-1/2 is equivalent to saying the distribution must occur in the year after you turn age 70. And then maybe they set the early withdrawal age at 59-1/2 to balance that, but who knows? When legislation stared to work its way through Congress all sorts of mark-ups occurs that can obscure the original logic of the proposal.
    talaniman's Avatar
    talaniman Posts: 53,884, Reputation: 10852
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    #4

    Oct 21, 2016, 09:12 AM
    This may help provide insights into the logic of the half year age designation for government benefits.

    https://www.thebalance.com/fiscal-ye...amples-3305794

    Why does the federal fiscal year begin on October 1? Congress designed it to allow newly elected officials to participate in the next year's budget process. For example, the President and Congressmen elected in November 2016 will take office in January 2017. They can create the the FY 2018 budget.
    joypulv's Avatar
    joypulv Posts: 21,593, Reputation: 2941
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    #5

    Oct 21, 2016, 09:56 AM
    I'm just waiting for the day when some gas station wakes up and starts rounding away those pesky 9/10s.
    ScottGem's Avatar
    ScottGem Posts: 64,970, Reputation: 6056
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    #6

    Oct 21, 2016, 01:18 PM
    Quote Originally Posted by joypulv View Post
    I'm just waiting for the day when some gas station wakes up and starts rounding away those pesky 9/10s.
    Blame RH Macy for that. He was the first retailer to start this 99 cent pricing because he felt consumers would truncate instead of round.
    ebaines's Avatar
    ebaines Posts: 12,129, Reputation: 1307
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    #7

    Oct 25, 2016, 09:42 AM
    I found this article:

    https://www.pearsonhighered.com/samp...0132333848.pdf

    which doesn't give a definitive answer, but suggests two influences that may have swayed the thinking back in the early 60's when Keogh Plans were first introduced:

    1. If you round a person's "true age" in years, months and days age to the nearest whole number, then anyone between ages 59-1/2 and 60-1/2 is considered to be 60 years old. So if you want a person to begin to start to withdraw their money without penalty when they are 60, from this point of view that means the person would be in the year between reaching age 59-1/2 and 60-1/2. Hence a true age 59-1/2 (midway through your 60th year on Earth) is set as the absolute beginning of being 60.

    2. As for age 70-1/2 for the start of mandatory distributions, its unclear but there may have been two factors at work here. First. as I pointed out earlier 70-1/2 "balances" nicely with 59-1/2 around age 65. Second, in the early 1960's when the Keogh Plans were first established the life expectancy for American males was 70.45 years. It seems somewhat logical to require that distributions start no later than life expectancy for the average wage earner (the point is to save for retirement so you should start using your retirement funds while you're still alive). In those days the principal bread winner in the typical family was male (don't shoot me, I'm only the messenger!). 70.45 rounds to 70.5.

    Once these ages were set in law for Keogh Plans, they were copied when IRAs, 401(k)'s and 403(b) plans were established.

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