Using Life Expectancy Tables for RMD
Using Life Expectancy Tables for RMD
My wife needs to take a RMD from a Inherited IRA from her Dad. He passed away last year at age 88. We moved the IRA to her name last year and now she needs to take her first RMD this year (2014) from this IRA. So I was trying to figure out the right amount and had a question. She is 67 now but will turn 68 in October 2014. What is the correct age for the RMD calculation?
From the IRS table: It say age 67 should use 19.4 years to calculate a RMD. So when I use age 67 I get a RMD of 5.155%
But if I use the IRS table for age 68 it shows 18.6 years to calculate the RMD. So then the age 68 RMD is 5.37%.
Which value is correct?
Thanks in advance...
From the IRS table: It say age 67 should use 19.4 years to calculate a RMD. So when I use age 67 I get a RMD of 5.155%
But if I use the IRS table for age 68 it shows 18.6 years to calculate the RMD. So then the age 68 RMD is 5.37%.
Which value is correct?
Thanks in advance...
Last edited by btenny on Sun Mar 16, 2014 3:30 pm, edited 1 time in total.
Re: Using Life Expectency Tables
I believe you mean RMD (Required Minimum Distribution), not MRD.
Gordon
Re: Using Life Expectency Tables
Minimum Required Distribution means the same thing as Required Minimum Distribution. At least, I can't parse the difference. One is the minimum that is required and the other is the required minimum. Both are required, and both are minimums.
Since dad was 88, he had already begun to take his whatevers.
Was the whatever taken in the year of death (2013)? If he didn't, she has to (and she is late).
Since dad was 88, he had already begun to take his whatevers.
pub 590If the owner died on or after his or her required beginning date (defined earlier), and you are the designated beneficiary, you must base required minimum distributions for years after the year of the owner's death on the longer of:
 Your single life expectancy shown on Table I in Appendix C as determined under Beneficiary an individual, later, or
The owner's life expectancy as determined under Death on or after required beginning date, under Beneficiary not an individual, later.
Was the whatever taken in the year of death (2013)? If he didn't, she has to (and she is late).
Of course, none of this has anything to do with your question, so let's take a look at Table I.If the owner died on or after the required beginning date, the IRA beneficiaries are responsible for figuring and distributing the owner's required minimum distribution in the year of death. The owner's required minimum distribution for the year of death generally is based on Table III (Uniform Lifetime) in Appendix C.
If you must use Table I, your life expectancy for 2014 is listed in the table next to your age as of your birthday in 2014.
Re: Using Life Expectancy Tables for RMD
P.S. The whole minimum thing seems redundant. If you are required to take a distribution, it doesn't much matter if it is a minimum or a maximum, it is required. If you found the required maximum distribution by looking in table I, would the amount of the distribution be any different?
I have an even stronger beef with the ATM: [edit: I just now saw my unintentional joke  if an RMD and MDR are the same, so should be the ATM and the AMT. ]
1) Figure your tax one way.
2) Figure your tax another way.
Pay the larger of the two.
That sure sounds more like a maximum than a minimum.
Note that the way larger works, it makes no difference which one you figure first. How about this?
Figure your tax under the alternative rules and put it on your 1040.
Figure your tax under the regular rules.
If the tax under the regular rules is greater then the tax under the alternative rules, add some extra tax on your return, the RMT, regular minimum tax.
P.P.S. It is Sunday afternoon and my current soap is a little boring. That explains some of my behavior, but not all.
I have an even stronger beef with the ATM: [edit: I just now saw my unintentional joke  if an RMD and MDR are the same, so should be the ATM and the AMT. ]
1) Figure your tax one way.
2) Figure your tax another way.
Pay the larger of the two.
That sure sounds more like a maximum than a minimum.
Note that the way larger works, it makes no difference which one you figure first. How about this?
Figure your tax under the alternative rules and put it on your 1040.
Figure your tax under the regular rules.
If the tax under the regular rules is greater then the tax under the alternative rules, add some extra tax on your return, the RMT, regular minimum tax.
P.P.S. It is Sunday afternoon and my current soap is a little boring. That explains some of my behavior, but not all.
Last edited by sscritic on Sun Mar 16, 2014 8:23 pm, edited 1 time in total.
Re: Using Life Expectancy Tables for RMD
sscritic, is alcohol involved? You're in a "mood"!
(Or, are you doing your taxes? That accounts for most of my "moods".)
(Or, are you doing your taxes? That accounts for most of my "moods".)
pjstack
Re: Using Life Expectancy Tables for RMD
Thanks guys.
From your answer I guess the RMD for 2014 is 5.37% of the 2013 year end balance and IRS life expectency is 18.6 years. So I will take out that amount and put a note for my taxes accordingly.
From your answer I guess the RMD for 2014 is 5.37% of the 2013 year end balance and IRS life expectency is 18.6 years. So I will take out that amount and put a note for my taxes accordingly.
Re: Using Life Expectancy Tables for RMD
I agree that the term is redundant. The caption to Section 401(a)(9) says "required distributions." I think that's the best term for it.sscritic wrote:Minimum Required Distribution means the same thing as Required Minimum Distribution. At least, I can't parse the difference. ...
For many years, most people called it minimun required distributions, or MRDs. I still generally call it that. However, the regulations (which were issued about a dozen years ago) refer to "required minimum distributions." That's probably why more people call it that, or RMDs.
Re: Using Life Expectancy Tables for RMD
now that you have your BS degree in RMDs (but be careful.......if ssc wasn't high on something, you might be reprimanded for using too few significant digits in your % or evenbtenny wrote:Thanks guys.
From your answer I guess the RMD for 2014 is 5.37% of the 2013 year end balance and IRS life expectency is 18.6 years. So I will take out that amount and put a note for my taxes accordingly.
for using a % at all ) , here is your graduate degree question...........what will your RMD factor be next year and in the years after that?
Re: Using Life Expectancy Tables for RMD
Well now I have come back down far enough to ask a few questions through my haze:kaneohe wrote:now that you have your BS degree in RMDs (but be careful.......if ssc wasn't high on something, you might be reprimanded for using too few significant digits in your % or evenbtenny wrote:Thanks guys.
From your answer I guess the RMD for 2014 is 5.37% of the 2013 year end balance and IRS life expectency is 18.6 years. So I will take out that amount and put a note for my taxes accordingly.
for using a % at all ) , here is your graduate degree question...........what will your RMD factor be next year and in the years after that?
What is $1,000,000 divided by 18.6?
What is $1,000,000 times 5.37%?
Are the numbers the same?
Which are you going to use as your RMD?
Which do the instructions say to use as your RMD?
Thanks kaneohe for helping me come out of the fog.

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Re: Using Life Expectancy Tables for RMD
It's not good to get TOO cavalier with terminology in this case.sscritic wrote:P.S. The whole minimum thing seems redundant. If you are required to take a distribution, it doesn't much matter if it is a minimum or a maximum, it is required...
It's perfectly acceptable to the IRS if you round your RMD UP to the next hundred dollars each year and take out $8400, say, rather than $8365.18.
But the important point is getting the rules right for one's particular IRA...
Attempted new signature...
Re: Using Life Expectancy Tables for RMD
But if you are required to take $8365.18, then you aren't required to take $8400. $8400 satisfies the requirement, but it isn't required. Nor is $32,865.43, but you can take that much if you want since it is at least $8365.18. The key is that you have taken $8365.18 + $24,500.25. Actually you can use any number for the second number, e.g., $8365.18 + $234.78, as long as the second number isn't negative (zero is just fine).The Wizard wrote: It's not good to get TOO cavalier with terminology in this case.
It's perfectly acceptable to the IRS if you round your RMD UP to the next hundred dollars each year and take out $8400, say, rather than $8365.18.
But the important point is getting the rules right for one's particular IRA...

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Re: Using Life Expectancy Tables for RMD
My friend has an inherited IRA following his mom's death in 2012. It is with Fidelity so whenever he signs into their website and goes to his IRA account, it tells him what his RMD is for the year and if he has taken it yet. It also tells him how it is calculated. In 2013, the divisor was 34.20 (years) and for 2014 it has dropped to 33.20 and will drop by 1 every year until the account drops to zero.
Last year, he rounded up to the nearest $100 to make it easy to play with the numbers at tax time (read: now, as I help him with his taxes). He has nearly all of his RMD withheld for taxes to lessen his tax bill in April and keep him in a "safe harbor" to avoid underwithholding penalties. He has a lot of investment income so this gives him a great chance to avoid problems later.
Last year, he rounded up to the nearest $100 to make it easy to play with the numbers at tax time (read: now, as I help him with his taxes). He has nearly all of his RMD withheld for taxes to lessen his tax bill in April and keep him in a "safe harbor" to avoid underwithholding penalties. He has a lot of investment income so this gives him a great chance to avoid problems later.
Re: Using Life Expectancy Tables for RMD
For your math issues 5.37% is the same as 1/18.6. So yes the numbers are the same.
My wife is going to take $2000 out of the account this week for the 2014 RMD. This is more than the minimun by a $140ish. She is going to spend it I guess. She is putting the money in her checking account.
Thanks..
My wife is going to take $2000 out of the account this week for the 2014 RMD. This is more than the minimun by a $140ish. She is going to spend it I guess. She is putting the money in her checking account.
Thanks..
Re: Using Life Expectancy Tables for RMD
Yes, age 68 is correct.btenny wrote:My wife needs to take a RMD from a Inherited IRA from her Dad. He passed away last year at age 88. We moved the IRA to her name last year and now she needs to take her first RMD this year (2014) from this IRA. So I was trying to figure out the right amount and had a question. She is 67 now but will turn 68 in October 2014. What is the correct age for the RMD calculation?
From the IRS table: It say age 67 should use 19.4 years to calculate a RMD. So when I use age 67 I get a RMD of 5.155%
But if I use the IRS table for age 68 it shows 18.6 years to calculate the RMD. So then the age 68 RMD is 5.37%.
Which value is correct?
Thanks in advance...
But it is also wise to check her Dad's last couple of returns to determine if he filed an 8606 reporting recovery of non deductible contributions he might have made. Any amount showing on line 14 of his last 8606 is also inherited by your wife, and by adding an 8606 to your joint return her RMDs will be less than fully taxable for the duration of the inherited IRA. She should also be sure to have named her own successor beneficiary to the inherited IRA ASAP.
Re: Using Life Expectancy Tables for RMD
Your calculator doesn't work the same way mine does. You might want to try it again.btenny wrote:For your math issues 5.37% is the same as 1/18.6. So yes the numbers are the same.
My wife is going to take $2000 out of the account this week for the 2014 RMD. This is more than the minimun by a $140ish.
If the relevant amount is $35,000, then
35,000 / 18.6 = 1881.72
35,000 x 0.0537 = 1879.50
Those are not the same numbers, but if she takes out $2000, she has taken out more than the right number as well as more than the wrong number. However, a distribution of 1880 does not meet the requirement, no matter that it is more than 1879.50.
Note that even if the balance were only $20,000, the numbers are not the same (but the number would not be close to 2000)
20,000 / 18.6 = 1075.27
20,000 x 0.0537 = 1074.00
Nope, not equal.
Quiz time: what is the largest number such that X / 18.6 = X x 0.537 after rounding both sides?
P.S. Count the key presses: .0537 is five; 18.6 is four. Getting the wrong answer takes more work than getting the right answer (the divide and the multiply are both one key press, and the balance is the same either way). Why would anyone go out of their way to do the extra work to get the wrong answer?
 frugaltype
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Re: Using Life Expectancy Tables for RMD
Fidelity presumable calculates it correctly, but one of my credit unions messed up, missing the oddity about the age/year. Good thing I had calculated out what it should be myself. Then they sent me a revised letter with the correct amount but rounded to the nearest dollar. So I am taking the correct amount and sending a note to the IRS. I have visions of the credit union people in some back room with calculators.scrabbler1 wrote:My friend has an inherited IRA following his mom's death in 2012. It is with Fidelity so whenever he signs into their website and goes to his IRA account, it tells him what his RMD is for the year and if he has taken it yet. It also tells him how it is calculated. In 2013, the divisor was 34.20 (years) and for 2014 it has dropped to 33.20 and will drop by 1 every year until the account drops to zero.
Re: Using Life Expectancy Tables for RMD
In her book Life and Death Planning for Retirement Benefits, the wellknown author Natalie Choate acknowledges that the regulations use the term "required minimum distribution" , or RMD. Nevertheless, she says she prefers to use MRD in order to avoid confusion with the related abbreviation RBD ("required beginning date").bsteiner wrote:For many years, most people called it minimun required distributions, or MRDs. I still generally call it that. However, the regulations (which were issued about a dozen years ago) refer to "required minimum distributions." That's probably why more people call it that, or RMDs.sscritic wrote:Minimum Required Distribution means the same thing as Required Minimum Distribution. At least, I can't parse the difference. ...
Re: Using Life Expectancy Tables for RMD
I thought "RBD" referred to Really Bad Day.MarkNYC wrote:In her book Life and Death Planning for Retirement Benefits, the wellknown author Natalie Choate acknowledges that the regulations use the term "required minimum distribution" , or RMD. Nevertheless, she says she prefers to use MRD in order to avoid confusion with the related abbreviation RBD ("required beginning date").bsteiner wrote:For many years, most people called it minimun required distributions, or MRDs. I still generally call it that. However, the regulations (which were issued about a dozen years ago) refer to "required minimum distributions." That's probably why more people call it that, or RMDs.sscritic wrote:Minimum Required Distribution means the same thing as Required Minimum Distribution. At least, I can't parse the difference. ...
Gordon
Re: Using Life Expectancy Tables for RMD
SScritic
I guess that confounded rounding error I made might get me if we did not take out slightly more than needed. So I guess the absolutely correct factor is 1/18.6 or 5.38% (rounded properly this time) for those that want a percentage.
I guess that confounded rounding error I made might get me if we did not take out slightly more than needed. So I guess the absolutely correct factor is 1/18.6 or 5.38% (rounded properly this time) for those that want a percentage.
Re: Using Life Expectancy Tables for RMD
As I recall Pub. 590 says to divide the balance by the life expectancy factor  if you just do that and round the answer to nearest penny the OP should be OK  don't know why you would take the reciprocal of the factor because then you have to further decide how many places to keep .

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Re: Using Life Expectancy Tables for RMD
On my calculator, 1.0/18.6 = 0.05376344.sscritic wrote:
P.S. Count the key presses: .0537 is five; 18.6 is four. Getting the wrong answer takes more work than getting the right answer (the divide and the multiply are both one key press, and the balance is the same either way). Why would anyone go out of their way to do the extra work to get the wrong answer?
Using that value might get one a more correct RMD, if you're someone who likes to take unnecessary extra steps to begin with...
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Re: Using Life Expectancy Tables for RMD
My wife understands percentages while dividing by some factor leaves here asking questions. So to save time and not spend hours in explanation I did the division for her and told her she had to take out 5.38% or slightly more. And yes I know they are not the same because of rounding but I suspect lots of people are like this.
Re: Using Life Expectancy Tables for RMD
Given all the different answers you can get by multiplying and the only one answer you can get by dividing, I suspect that the IRS told us to divide rather than multiply so we could all be in agreement.
Now if the IRS had given us a percentage to two places and told us to use it, I would, although I suspect that there would still be those who would take the given percentage, find the reciprocal, round off, and then divide, ensuring themselves of the wrong answer.
Now if the IRS had given us a percentage to two places and told us to use it, I would, although I suspect that there would still be those who would take the given percentage, find the reciprocal, round off, and then divide, ensuring themselves of the wrong answer.