Required Minimum Distribution Rules

This site is a a little technical and was created as a resource for financial advisors and financial planners. Consumers may want to visit our consumer site on IRA distributions. Financial advisors will find some of the more technical issues here such as exactly how section 72t is implemented, how to take distributions from just one IRA account if the client has several and what happens if your client misses a distribution. Financial advisors and financial planners may also want to send their clients and prospects a newsletter that can be focused on IRA distribution and management issues.

There are three sets of tables for taking required distributions.

  • RMD Table used by the IRA owner who is single or married
  • RMD Tables used by the IRA owners who is married, has named
    his spouse as beneficiarary and that spouse is more than 10
    years younger
  • RMD Tables used by IRA Beneficiaries

For IRA or qualified plan account owners

The following RMD table, to be used by the IRA owner is used
as follows.

Figure your required minimum distribution for each year by dividing the IRA account balance (defined next) as of the close of business on December 31 of the receding year by the applicable distribution period or life expectancy.The IRA account balance is the amount in the IRA at the end of the year preceding the year for which the required minimum distribution is being figured.

Let’s take an example:

Laura was born on October 1, 1934. She is an unmarried participant in a qualified defined contribution plan. She reaches age 701/2 in 2005. Her required begining date is April 1, 2006. As of December 31, 2004, her account balance was $26,500. That amount is distributed to her on April 1, 2006 is $1000 ($26,500 / 26.5).

Note, that the account balance of the IRA as of 12/31/04 would have been adjusted upward for any amounts rolled over to a Roth that were later recharacrterized (put back in the IRA) or outstanding amounts rolled over (i.e. amounts in trransit not in any acciount as of 12.31.04). In other words, IRS closes the possibility of manipulating the IRA balance as of 12/31/04). Each year this process is repeated with the prior year’s year end IRA balance being divided by the factor on the table below related to the IRA owner’s age.

 

RMD Table III
(Uniform Lifetime)
(For Use by:

  • Unmarried Owners,
  • Married Owners Whose Spouses
    Are Not More Than 10 Years Younger, and
  • Married Owners Whose Spouses
    Are Not the Sole Beneficiaries of their IRAs)

 

 

Age Distribution Period Age Distribution Period
70 27.4 93 9.6
71 26.5 94 9.1
72 25.6 95 8.6
73 24.7 96 8.1
74 23.8 97 7.6
75 22.9 98 7.1
76 22.0 99 6.7
77 21.2 100 6.3
78 20.3 101 5.9
79 19.5 102 5.5
80 18.7 103 5.2
81 17.9 104 4.9
82 17.1 105 4.5
83 16.3 106 4.2
84 15.5 107 3.9
85 14.8 108 3.7
86 14.1 109 3.4
87 13.4 110 3.1
88 12.7 111 2.9
89 12.0 112 2.6
90 11.4 113 2.4
91 10.8 114 2.1
92 10.2 115 and
over
1.9

Married with Spouse More than 10 years younger

If the plan owner had names a spouse as sole beneficiary who was more than 10 years his junior, then other tables are used based on joint life expectancy. This can be found at the back of IRS Publication 590. Note: Your marital status is determined as of January 1 od each year. If you are married on January 1 but get divorced or your spouse dies during the year, your spouse as of January 1 remains your sole beneficiary for that year. For purposes of determining your distribution period, a change in beneficiary is effective in the year following the year of death or divorce.
If your spouse is the sole beneficiary of your IRA, and he or she dies before you, your spouse will not fail to be your sole beneficiary for the year that he or she died solely because someone other than your spouse is named a beneficiary for the rest of that year.

However, if you get divorced during the year and change the beneficiary designation on the IRA during that same year, your former spouse will not be treated as the sole beneficiary for that year.

For IRA beneficiaries

If you inherit an IRA, the distribution requirements are the similar to the owner. Except you use a speciali table for beneciciaries and rather than ever looking at the table again after your first distribution, you simply subtract 1 from the divisor.

Example:

Example. Your father died in 2004. You are the desig nated beneficiary of your father’s traditional IRA. You are 53 years old in 2005. You use the Table for benefciaries below and see that your life expectancy in 2005 is 31.4. If the IRA was worth $100,000 at the end of 2004, your required minimum distribution for
2005 is $3,185 ($100,000 ÷ 31.4). Let’s say at the end of 2005, the IRA is again worth $100,000, you distribute $3289 ($100,000/30.4) because wach year you subtract 1 from your original divisor.

Note that this process of the benevciciary slowly emotyoing the IRA over their lifetime is called the stretch IRA. Many parnets may want their children to have this advanatge. There’s opnly one problem. The inheritors can empty the IRA as fast as they desire, can take the shole account, pay the tax and blow it in
a weekend in Vegas. This can be controlled by naming as trust as beneficiary.

Single Life Expectancy
RMD Table (for Inherited IRAs)

(For calculating post-death required distributions
to beneficiaries)

(From IRS Publication 590)

Age of

IRA or Plan Beneficiary

Life Expectancy

(in years)

Age of

IRA or Plan Beneficiary

Life Expectancy

(in years)

Age of

IRA or Plan Beneficiary

Life Expectancy

(in years)

0

1

2

3

4

5

6

7

8

9

10

82.4

81.6

80.6

79.7

78.7

77.7

76.7

75.8

74.8

73.8

72.8

41

42

43

44

45

46

47

48

49

50

42.7

41.7

40.7

39.8

38.8

37.9

37.0

36.0

35.1

34.2

81

82

83

84

85

86

87

88

89

90

9.7

9.1

8.6

8.1

7.6

7.1

6.7

6.3

5.9

5.5

11

12

13

14

15

71.8

70.8

69.9

68.9

67.9

51

52

53

54

55

33.3

32.3

31.4

30.5

29.6

91

92

93

94

95

5.2

4.9

4.6

4.3

4.1

16

17

18

19

20

66.9

66.0

65.0

64.0

63.0

56

57

58

59

60

28.7

27.9

27.0

26.1

25.2

96

97

98

99

100

3.8

3.6

3.4

3.1

2.9

21

22

23

24

25

62.1

61.1

60.1

59.1

58.2

61

62

63

64

65

24.4

23.5

22.7

21.8

21.0

101

102

103

104

105

 

2.7

2.5

2.3

2.1

1.9