IRA Minimum Distribution Table
In January, 2001, the government released new proposed minimum distribution regulations for retirement assets. These rules significantly simplify the 1987 proposals concerning minimum distribution calculations and beneficiary designations. The proposed regulations reduce the required minimum distribution for most retirement plan owners, resulting in a longer period of tax-deferred growth.
Life Expectancy Table
A simple IRA life expectancy table has been developed to determine lifetime required minimum distributions. This table makes it unnecessary to recalculate life expectancy each year when withdrawing money from an IRA after age 70 ˝.
To use the table, find your age; then divide the amount of the prior year-end balance of your retirement account by the distribution factor for your age. This will be your required minimum distribution amount for the current year.
For example, the owner of an IRA was born on April 30, 1931. On October 30, 2001, she turned 70 ˝ .She had $250,000 in her IRA on December 31, 2000 (the prior year). Her minimum required distribution would be $9,124 ($250,000 / 27.4) for the year 2001, which must be taken by April 1, 2002.
Beneficiary Designations
Under the 1987 proposed regulations, an individual needed to name a beneficiary before the required beginning date, and this designation was irrevocable. Under the 2001 proposed regulations, this is no longer necessary. A beneficiary can be determined up to the end of the year after the owner’s death, and a beneficiary designation can be changed without affecting one’s minimum distribution. Charities may also be named as beneficiaries.
Unlike the 1987 regulations, a beneficiary’s age is not taken into consideration when calculating the required minimum distribution. The exception to this, however, is if the beneficiary is more than 10 years younger than the owner of the IRA; in that case, the owner may choose to use a joint life expectancy factor based on the owner’s and the beneficiary’s ages. To learn more about beneficiary distributions, read our article New IRA Beneficiary Distribution Regulations
