Breaking News:

New IRS Regulations for IRA Withdrawals

IRS has finally decided to put forth a life expectancy table that makes sense for IRA withdrawals. No longer will there be various calculations to figure out the minimum payouts using the joint life expectancy of the IRA owner and the beneficiary. The owner would no longer have to designate a beneficiary before the April 1st of the year that he/she turns 70 1/2 years old.

Under the new regulations, the beneficiary can be designated by December 31st one year after the IRA owner’s death. The new life expectancy table is as follows (Distribution period for Minimum Required Distribution):

Age Distribution Period Age Distribution Period Age Distribution Age
70
26.2
 83
15.3
 96
7.3
71
25.3
 84
14.5
 97
6.9
72
24.4
 85
13.8
 98
6.5
73
23.5
 86
13.1
 99
6.1
74
22.7
 87
12.4
 100
5.7
75
21.8
 88
11.8
 101
5.3
76
20.9
 89
11.1
 102
5.0
77
20.1
 90
10.5
 103
4.7
78
19.2
 91
9.9
 104
4.4
79
18.4
 92
9.4
 105
4.1
80
17.6
 93
8.8
 106
3.8
81
16.8
 94
8.3
 107
3.6
82
16.0
 95
7.8
 108
3.3

By creating a table for minimum payouts, IRS has allowed many IRA owners to stretch out their IRAs for longer periods of time. IRA owners can withdraw as much as they want from the age of 59 _ to 70 _ but once they reach 70 _ they have to make MRDs (minimum required distribution) according to the IRS table.

Beneficiaries can be changed mulitple times and that no longer carries a penalty with it. The minimum payout each year is not affected by the change of beneficiary. The new rules don’t take effect until January 1st, 2002 but IRS has no objections against taxpayers using them now.

Example. If John has an account balance of $41,800 at the age of 76, the minimum payout for that year for John would be ($41,800 divided by 20.9) $2000. The following year the account balance reduced by $2000 would equal $39,800. The MRD for that year would be ($39,800 divided by 20.1) $1980.09.