Beneficiary Required Minimum Distributions
This Beneficiary Required Minimum Distributions Calculator is designed to show the required minimum annual distributions from an inherited retirement account to a beneficiary, based on the beneficiary's age. To use this tool you will need the account balance of the inherited account; the age at which the original account owner passed away; the age of the beneficiary at the end of the year the original account owner died; the beneficiary's age at the time of distribution and the account's annual rate of return. This calculator will take all of this information into consideration and create a chart of required minimum distributions by your age. You can also select to display the result by age or by required minimum distributions.
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Beneficiary Required Minimum Distributions Inputs
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Required Minimum Distributions by Age of Beneficiary
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Account Balance by Age of Beneficiary
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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 2019 to ensure compliance with IRS rules and regulations. If you have questions, please consult with your own tax advisor regarding your specific situation.
Life expectancy calculations
Life expectancy is usually determined using the Single Life Expectancy table and the beneficiary's age on 12/31 of the year following the owner's death. However, if this is not the first year of distribution for the beneficiary, there is an additional step. First, we find the original life expectancy using the Single Life Expectancy table and the beneficiary's age on 12/31 of the year following the owner's death. Then, the current life expectancy is calculated by subtracting one for each year that has passed, from the original life expectancy. Likewise, in all future years, the remaining life expectancy is calculated by subtracting one for each additional year that has passed. It is not allowed to lookup or 'recalculate' a new starting life expectancy after distributions have begun.
If the account owner was younger than the beneficiary, and it was past the required begin date for distributions when the account owner died, the beneficiary can choose to use the account owner's life expectancy to calculate Required Minimum Distributions (RMD). In this special case, the result will always produce a lower RMD. If this situation occurs, this calculator will use the account owner's age when calculating RMDs. Other than using the account owner's age at death, the calculation is identical to the one stated above.
A final option, used by this calculator, is the ability for a spouse to take an inherited account and treat it as his or her own. In this case, no distributions are required until the year in which the spouse reaches age 70 1/2. When distributions do begin, the spouse can use the Uniform Lifetime Table, which produces longer life expectancies than the Single Life Expectancy table, to determine the applicable life expectancy. In addition, a spouse is able to 'recalculate' or lookup a new life expectancy from the Uniform Lifetime Table each year. This produces the lowest RMD in all but the most unusual situations. This calculator will always assume that a spouse will wish to treat an inherited IRA as their own.
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.
Account owner's age at death
If the account owner is younger than the beneficiary and the account owner dies after the required begin date, we use the account owner's life expectancy to calculate RMDs for the beneficiary. This will lower the RMD for non-spouse beneficiaries.
Beneficiary age as of 12/31 of the year following the owner's death
This is the age of the beneficiary as of December 31st of the year following the account owner's death. For example, if the account owner died in March of 1999, you would need to enter the beneficiary's age as of December 31, 2000.
Beneficiary age as of 12/31 of the distribution year
This is the beneficiary's age as of December 31st of the distribution year.
Estimated rate of return (provides an estimate of future RMDs)
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 dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2018, had an annual compounded rate of return of 12.1%, including reinvestment of dividends. From January 1, 1970 to December 31st 2018, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.2% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and 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 investment funds and/or investment companies may charge.
Is account owner beneficiary's spouse?
If the original account owner was your spouse, and you were the sole beneficiary, then you have the ability to treat the inherited account as if it were your own. This is the most flexible and usually the best choice for this type of beneficiary. This calculator assumes that this is an option you would like to take. If you check this box, normal account owner distribution rules apply, including, but not limited to, minimum distributions not being required until you reach age 70 1/2.
Is beneficiary's birthday after June 30th?
Check this box if the beneficiary's birthday is after June 30th (note: this only applies to spousal beneficiaries). This is a factor in determining whether the IRS requires spousal inherited accounts 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.
Did account owner die after Required Begin Date?
Check this box if the account owner died after they were required to start receiving distributions.
Beneficiary Required Minimum Distributions Calculator Overview
If you inherit a retirement plan from your spouse, a family member, or a close personal relation, then you will need to decide how you want to handle the management of the account.
In most cases you will want to first refer to the rules and regulations set out by the IRS regarding minimum distribution rates and alternative cash out possibilities. Your first option is to cash out the retirement account and pay taxes on a lump sum distribution. If you don't want to cash out the account then you should hold off making distributions from the account until it is required by the IRS.
If you would like to examine when distributions will need to be made and how much you will need to withdraw as the beneficiary of a retirement account then you should use our Beneficiary Required Minimum Distributions calculator.
How to Use the Beneficiary Required Minimum Distributions Calculator
Follow these steps:
- Enter the account balance of the retirement account as of the end of the previous year
- Specify the age of the account owner at the time of their death
- Input the age of the account’s beneficiary as of December 31 in the year immediately following the account owner’s death
- Add the beneficiary’s age as of December 31 in the distribution year you are calculating
- Enter the estimated rate of return for the retirement account
- If applicable, check the box to indicate if you were the spouse of the original account owner and sole beneficiary
- Indicate if your birthday falls after June 30 of each year
- Indicate if the original account owner died after the date they were required to begin receiving distributions from the account
- Click "View Report" to see your result.
Who is this Calculator for?
This calculator is most useful if you:
- Are the spouse or family member of a retirement account owner who has recently passed away
- Stand to become a beneficiary of an inherited retirement account
- Need to know the minimum distribution requirements of a retirement account you have inherited.
What is a required minimum distribution?
Most retirement account plans make it compulsory for you to begin taking withdrawals once you reach the age of 70.5 years. Conversely, the required minimum distribution is the minimum amount of money which you must withdraw from the retirement account every year.
What’s the difference if I am the account owner’s spouse?
Spouses of deceased retirement account owners follow slightly different rules to other beneficiaries. If you, the spouse, are the sole beneficiary or the account, then you gain the ability to treat the inherited account as your own. This allows you more flexibility and is typically the most sensible choice – this calculator assumes that you would take this option if it is available to you.
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