RMD and Annuity Life Expectancy Tables

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winski58
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RMD and Annuity Life Expectancy Tables

Post by winski58 »

Are the same Life Expectancy Tables used for both RMD and Annuity Exclusion Ratio calculations?
bsteiner
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Re: RMD and Annuity Life Expectancy Tables

Post by bsteiner »

winski58 wrote:Are the same Life Expectancy Tables used for both RMD and Annuity Exclusion Ratio calculations?
No. Life expectancy for required distributions is slightly longer than for annuities.
ralph124cf
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Re: RMD and Annuity Life Expectancy Tables

Post by ralph124cf »

bsteiner wrote:
winski58 wrote:Are the same Life Expectancy Tables used for both RMD and Annuity Exclusion Ratio calculations?
No. Life expectancy for required distributions is slightly longer than for annuities.

This is because people who buy annuities are self selected as people who expect to live a longer than average life.

Ralph
The Wizard
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Re: RMD and Annuity Life Expectancy Tables

Post by The Wizard »

bsteiner wrote:
winski58 wrote:Are the same Life Expectancy Tables used for both RMD and Annuity Exclusion Ratio calculations?
No. Life expectancy for required distributions is slightly longer than for annuities.
I'm puzzling over what "longer" means here.
I guess you're saying that the RMD expected years remaining table is a bit longer than current expected lifespans, i.e. 27.4 years given that you've reached age 70, where a more accurate number of average years remaining might be 26.9 or so.

The puzzling part is that Social Security delayed retirement credits apparently increase a bit more than current actuarial tables might compute. This because the SSA is using outdated mortality tables and lifespans have increased since those tables were made.

So the IRS and the SSA are using different actuarial assumptions which is fine by me...
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The Wizard
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Re: RMD and Annuity Life Expectancy Tables

Post by The Wizard »

ralph124cf wrote:
bsteiner wrote:
winski58 wrote:Are the same Life Expectancy Tables used for both RMD and Annuity Exclusion Ratio calculations?
No. Life expectancy for required distributions is slightly longer than for annuities.

This is because people who buy annuities are self selected as people who expect to live a longer than average life.

Ralph
We annuity purchasers are self selected, yes, but that tends to argue the OPPOSITE of what bsteiner is asserting...
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Topic Author
winski58
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Re: RMD and Annuity Life Expectancy Tables

Post by winski58 »

The Wizard wrote:
ralph124cf wrote:
bsteiner wrote:
winski58 wrote:Are the same Life Expectancy Tables used for both RMD and Annuity Exclusion Ratio calculations?
No. Life expectancy for required distributions is slightly longer than for annuities.

This is because people who buy annuities are self selected as people who expect to live a longer than average life.

Ralph
We annuity purchasers are self selected, yes, but that tends to argue the OPPOSITE of what bsteiner is asserting...
Yes, Table V of IRS Publication 939, pg 26 (annuity table) has a 77 year old with an 11.2 multiple and the RMD Table is 21.2. So a 77 year old according to the RMD table is expected to live to 98 and the annuity guy is expected to live to 87. Am I interpreting this correctly?
bsteiner
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Re: RMD and Annuity Life Expectancy Tables

Post by bsteiner »

winski58 wrote:... Table V of IRS Publication 939, pg 26 (annuity table) has a 77 year old with an 11.2 multiple and the RMD Table is 21.2. So a 77 year old according to the RMD table is expected to live to 98 and the annuity guy is expected to live to 87. Am I interpreting this correctly?
No. The RMD table is based on the joint and survivor life expectancy of the IRA owner and a person 10 years younger (in your example, the joint and survivor life expectancy of two persons, ages 77 and 67). The comparison should be to the single life table for beneficiaries, which is 12.1 years at age 77. That's still different from the annuity table, but only slightly.
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