Calculation notes
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 2007 to ensure compliance with IRS 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
2007, the average compounded rate of return for the S&P
500, including reinvestment of dividends, was approximately
11.4% per year (source: www.standardandpoors.com). During
this period, the highest 12-month return was 61%, and the
lowest was -39%. Savings accounts at a bank can 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 generally 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. It is not possible to
invest directly in an index and the compounded rate of
return noted above does not reflect sales charges and
other fees that funds and/or investment companies may
charge.
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.
