Computing the Required Minimum Distribution (RMD) For IRA's

1. Find your account balance for your IRA’s as of December 31^st.

1. The first RMD withdrawal will be based on the account balance as of December 31^st prior to reaching 70.5…even though you may be 71 years old at the time of the first RMD computation.

2. Money rolled over in the IRA is included (the year of the rollover)…even though it was not received by December 31st.

3. All RMD calculations (with the exception of #b above) are based on the account balance as of December 31^st…from the prior year.

2. Divide the account balance in Step #1 by the “life expectancy” factor.

1. You have two tables in the “life expectancy” table to choose from (Uniform or Joint).

2. If you are single…use the “Uniform” factors.

3. If you have a spouse who is younger than you (1 yr. to 10 yrs younger)…use the “Uniform” factors.

4. If you have a spouse who is 11 yrs. to 30 yrs. younger (as example)…use the “Joint” factors.

5. You can change from “Uniform” to “Joint”…if your spouse is the sole “primary beneficiary” for the entire year.

6. If there are multiple beneficiaries designated as the “primary beneficiary”…then you must use the “Uniform” factors.

7. Example: You are age 71. The RMD factor for Uniform is 26.5. The account balance as of December 31^st is $100,000. Then the RMD is $3,773.58 (100,000/26.5).

8. If you remarry the year of the divorce, you still are considered married based on the “ex’s” age (for the RMD computation). But you can get a “spousal exception” from the IRS.

3. If the client has more than one IRA.

a. Although you must calculate RMD separately for each IRA, you do not have to make withdrawals from each IRA. The total RMD may be taken from just one IRA to pay for the aggregate RMD of all the IRA’s.

4. What is the most efficient way to liquidate an IRA and meet RMD payment plan?

1. You are required to pay your RMD till age 115. This is basically a pension to the IRS. You are losing 30 years worth of tax deductions in a decade of RMD payments. This is basically a tax liability to you and your spouse.
2. The most efficient way to liquidate RMD…is to compress the RMD into a shorter time span. Mathematically breakup the IRA(s) into three groups…and income leg, a growth leg, and a recovery leg. For the recovery leg, you are converting the IRA to Roth…so you no longer need to pay “Uncle Sam,” and the “initial starting balance” is recovered tax FREE. The income & growth legs are liquidated over a 10 to 15 year time span to meet & exceed RMD. Once the income & growth legs (your IRA’s) are liquidated, your recovery leg recovers the “original starting balance” of all your IRA’s…tax free. You no longer need to worry about RMD, and you have recovered the initial starting balance of the IRA’s tax free. And what’s nice, to “top it off” you can compute the recovery leg to exceed the “original starting balance.” If your interested in such an equation, please go to: mutualfundrecoverysolutions.com .

Sincerely,

John Bagwell

The Truth About Financial Products.com

www.thetruthaboutfinancialproducts.com