RMD and Life Expectancy

The concept of life expectancy is very important for the calculation of Required Minimum Requirements or RMD. RMD and life expectancy are discussed in this section of the IRA Rules website.

Important RMD Considerations

It is important that IRA owners comply with IRA rules, IRA distribution rules, and IRA rules regarding required minimum distribution (RMD). Failure to take theRequired Minimum Distribution (RMD) may subject the IRA owner to an excise penalty tax of 50% of the amount that should have been distributed. Some important facts of IRA Rules regarding Required Minimum Distributions (RMD) are laid out below.

• Required Minimum distributions (RMDs) are merely annual minimums. IRA distribution rules allow greater distribution amounts to be taken each year.

   

• Each year stands on its own. If more than the Required Minimum Distribution or RMD is distributed in one year, the excess cannot be used to offset the next year's Required Minimum Distribution.

   

• The Required Minimum Distribution (RMD) must be calculated separately for each IRA individual retirement account. The aggregate of all such amounts may be distributed from any one or more IRA accounts, regardless of whether the IRAs are established with the same Custodian.

   

• If there are multiple primary beneficiaries on one IRA individual retirement acount, then the Uniform Table must be used.

   

• Changing a beneficiary after the Required Beginning Date will not change the Required Minimum Distribution amount, under IRA distribution rules. The exception is if the IRA owner makes his or her spouse, who is greater than 10 years younger than the IRA owner, the sole primary beneficiary, for the entire Distribution Calendar Year. In this case, the IRA owner could use the Joint Life Expectancy Table.

IRA Rules on How to Determine the Life Expectancy Factor (for IRA owners)

Under IRA Rules, there are now only two calculation choices for Life expectancy:

1) Uniform Life Expectancy:

When the IRA owner is alive, the life expectancy factor used to calculate Required Minimum Distribution (RMD) will be obtained from the Uniform Table, under IRA rules. The IRA owner will refer back to the Uniform Table each Distribution Calendar Year (DCY) and use the factor that appears next to the IRA owner's age on his or her birthday during that year. The Uniform Table will generally result in a smaller annual RMD amount for most IRA owners andstretch-out the IRA for a greater number of years than would have been the case under the old RMD rules.

OR

2) Joint Life Expectancy, Recalculating Both Life Expectancy:

Under the new RMD rules, all IRA owners must use the Uniform Table except for an IRA owner whose spouse is the sole primary beneficiary for the entire Distribution Calendar Year (DCY) and the spouse is more than 10 years younger than the IRA owner. This group of IRA owners may use the Joint Life Expectancy Tables. For this table, the ages of the IRA owner and the spouse as of December 31st of each Distribution Calendar Year (DCY) are used to find that year's life expectancy factor.