This calculator follows the latest IRS rules and life
expectancy tables, which were finalized on April 16th, 2002. These new IRS
regulations were optional in 2002 but became mandatory as of January 1st, 2003.
This calculator was last updated January 2005 to ensure compliance with IRA
rules and regulations. If you have questions, please consult with your own tax
advisor regarding your specific situation.
Account balance as of 12/31 of year prior to distribution year
This is
the fair market value of your account as of the close of business on December
31st of the preceding year. For IRAs, no adjustments are made for contributions
or distributions after that date. If you made a transfer or rollover from one
account on or before December 31st of the preceding year and the funds were
received by a new account in the next year, you will need to increase your
December 31st fair market value by the amount that was transferred or rolled
over and not included in the December 31 value of either account.
Your age as of 12/31 of distribution year
Use your age as of 12/31 for
the year you are calculating the distribution.
Beneficiary age
Use the age your beneficiary will turn on their
birthday for the year you are receiving the distribution.
Estimated rate of return
This is the expected rate of return on your
account. This is only used to help project your future account balances (which
of course will impact your required minimum distribution). The actual rate of
return is largely dependant on the type of investments you select. From January
1970 to December 2004, the average compounded rate of return for the S&P 500,
including reinvestment of dividends, was approximately 11.5% per year. During
this period, the highest 12-month return was 64%, and the lowest was -39%.
Savings accounts at a bank pay as little as 1% or less. It is important to
remember that future rates of return can't be predicted with certainty and that
investments that pay higher rates of return are subject to higher risk and
volatility. The actual rate of return on investments can vary widely over time,
especially for long-term investments. This includes the potential loss of
principal on your investment.
Is your birthday after June 30th?
Check this box if your birthday is
after June 30th. This is a factor in determining whether the IRS requires you
to begin distributions when you are age 70 or 71. For calculating your first
year's distribution, the IRS specifically states to use your age on your
birthday in the year you turn 70 1/2. For example, if your birthday is between
January 1st and June 30th, the first year of distribution would be at age 70.
If your birthday is between July 1st and December 31st, the first year of
distribution would be at age 71.
Is your sole beneficiary a spouse?
Check this box if your only
beneficiary is your spouse. This can be a factor in determining whether the IRS
uniform table must be used or if you are able to use the Joint Life Expectancy
Table.
The new IRS
rules use a uniform table to calculate all life expectancies for determining a
minimum distribution. The only exception to this rule is if the only
beneficiary is a spouse and he or she is more than 10 years younger than the
account owner. In this situation, the joint life expectancy table is used. The
Joint Life expectancy table normally produces lower required distributions.
Information and interactive calculators are made available to you as self-help
tools for your independent use and are not intended to provide investment
advice. We can not and do not guarantee their applicability or accuracy in
regards to your individual circumstances. All examples are hypothetical and are
for illustrative purposes. We encourage you to seek personalized advice from
qualified professionals regarding all personal finance issues.
