January 2002
Q. I need a better understanding of the process I should use to
calculate the Required Minimum Distribution from my IRA. I know that
I can look up the Required Minimum Distribution Period in a table.
But how do I determine the correct account balance and age values to
use?
A. The U.S. Treasury Department has proposed changes to simplify the
Required Minimum Distribution (RMD) process. One of these changes
establishes a uniform table that nearly everyone can use to determine
their RMD for a given tax year. This table is called the Minimum
Distribution Table. To use it, you must first identify two values:
your age and your IRA account balance.
Your IRA account balance is the total in your account on December 31
of the year immediately preceding the year for which distributions
are being made. For example, your RMD for 2001 should be computed
using the account balance as of December 31, 2000.
Your age is determined by how old you are on your birthday in the
distribution year (it is NOT determined by your age on December 31 of
the preceding year). For example, to compute your RMD for 2001, use
your age on your birthday in 2001.
The Minimum Distribution Table is shown below. (It can be found in
the Proposed Regulations, Section 1.401(a)(9)-5, Q&A 4(a)(2). To
determine your RMD for the year 2001, consult the table using the
following steps:
- Find your age on your 2001 birthday. The figure beside your age
is your life expectancy factor.
- Divide the total value of all assets within your IRA account as
of December 31, 2000, by the life expectancy factor.
- The resulting number is your RMD for the year 2001.
(NOTE: In general, this table should not be used in the case of an
IRA owner or employee whose sole beneficiary is a spouse who is more
than ten years younger. Other computation options apply. Consult your
financial advisor for advice.)
The following table represents the life expectancy factors for ages 70
through 115. It is presented in three columns, in the format
Age / Life Expectancy Factor.
| 70 / 26.2 |
|
85 / 13.8 |
|
100 / 5.7 |
| 71 / 25.3 |
|
86 / 13.1 |
|
101 / 5.3 |
| 72 / 24.4 |
|
87 / 12.4 |
|
102 / 5.0 |
| 73 / 23.5 |
|
88 / 11.8 |
|
103 / 4.7 |
| 74 / 22.7 |
|
89 / 11.1 |
|
104 / 4.4 |
| 75 / 21.8 |
|
90 / 10.5 |
|
105 / 4.1 |
| 76 / 20.9 |
|
91 / 9.9 |
|
106 / 3.8 |
| 77 / 20.1 |
|
92 / 9.4 |
|
107 / 3.6 |
| 78 / 19.2 |
|
93 / 8.8 |
|
108 / 3.3 |
| 79 / 18.4 |
|
94 / 8.3 |
|
109 / 3.1 |
| 80 / 17.6 |
|
95 / 7.8 |
|
110 / 2.8 |
| 81 / 16.8 |
|
96 / 7.3 |
|
111 / 2.6 |
| 82 / 16.0 |
|
97 / 6.9 |
|
112 / 2.4 |
| 83 / 15.3 |
|
98 / 6.5 |
|
113 / 2.2 |
| 84 / 14.5 |
|
99 / 6.1 |
|
114 / 2.2 |
115 and older 1.8
Overall, the Treasury Department's proposed changes will make it
easier for you to determine your RMD and will probably reduce the
amount you must withdraw. Some additional advantages to the changes
are that they:
- Permit you to calculate your RMD without regard to your
beneficiary's age (unless it is to your advantage to do so)
- Permit the beneficiary to be determined as late as the end of the
year following the year of a person's death
- Permit post-death distributions to be calculated based on the
beneficiary's remaining life expectancy at the time of death
You may want to consult with your tax advisor to see how these rules
affect you.
