What is a Term Certain Method?
The “term certain” method is a common approach to the calculation of the distribution of assets that are part of a retirement account. Use of this method takes into consideration a number of factors, including the life expectancy of the individual. Many different types of retirement accounts make use of the term certain method as a means of efficiently distributing funds once the recipient has retired and begins to draw on the resources amassed in the account over the years. Key to the application of the term certain method is to determine the life expectancy of the individual. In particular, this has to do with the age of the person at the point of retirement and when the disbursement of funds from the retirement account begins. Projecting the number of years that the individual is anticipated to live after beginning retirement helps to ensure that the reserves will provide an equitable source of revenue for as long as the person remains alive. Generally, the first year of distributio
