Life Expectancy Tables to Determine Required Minimum Distributions IRAs and Retirement Accounts
 

Life Expectancy Tables to Determine Required Minimum Distributions IRAs and Retirement Accounts
By: Patricia T. Henssler, C.P.A.
The Henssler Financial Group Position Paper

The regulations covering required minimum distributions (RMD) were finalized in April 2002. Proposed regs were issued in 1987 and 2001. The 2001 revised proposed regs greatly simplified the rules for calculating the RMD, as well as providing a longer time over which a taxpayer can take minimum distributions.

The Final Regulations include most of this "simplification" and include updated life expectancy tables. The last time the tables were revised was in 1983. The new life expectancy tables reflect longer life expectancies and therefore permit required distributions to be smaller.

The final regulations require that you use the new rules and tables for RMD's required after January 1, 2003.

Keep in mind that these tables only calculate your RMD. You can always withdraw more than what is required. The required minimum withdrawal is used to calculate the 50% excise penalty on Excess Accumulation (Insufficient Distribution). If you do not withdraw the RMD after age 70½, you will be penalized 50% of the shortfall.

The Tables

The Tables, as well as simple explanations of "the rules" can be found in IRS Publication 590, found at www.irs.gov.

Which Table Do You Use?

Table III

Use Table III if you are the IRA owner, unless your spousal beneficiary is more than 10 years younger than you are.

Table II

Use Table II if you are the IRA owner and the periodic payments are for your life and the life of your spouse who is more than 10 years younger than you.

Table I

Use Table I if you are an individual and the owner's designated beneficiary but are not both the owner's spouse and sole beneficiary. (There are special rules for the owner's spouse.)

Use Table I if you are the owner's estate or otherwise not an individual and the owner died on or after the required beginning date. (Not to be used in the year of the owner's death.)

What Age Do You Use with the Table(s)?

Use the age you will be by the end of the calendar year, regardless of when you take the distribution.

For instance, if you are 70 ½ on March 5 and will become 71 on September 5, you will use the divisor found at age 71.

If you are 70 ½ on December 1 and decide to take your first required minimum distribution in this tax year, you would use the divisor found at age 70.

If you would like any further information regarding this issue as well as any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.

All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.
 
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