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When you are the beneficiary of a retirement plan, specific IRS rules regulate the minimum withdrawals you must take. If you want to simply take your inherited money right now and pay taxes, you can. But if you want to defer taxes as long as possible, there are certain distribution requirements with which you must comply. Use this calculator to determine your Required Minimum Distributions (RMD) as a beneficiary of a retirement account.
Are you required to take an RMD? If you are the surviving spouse and sole beneficiary of the decedent's account, you have the option of delaying RMDs until the year the original IRA owner would have been age 70 1/2. This option may appeal if you are under age 59 1/2, and think you may need access to these funds. Treating the account as a beneficiary IRA will allow you to take distributions as needed but still avoid a 10% penalty on premature distributions. The most popular option for a surviving spouse who is the sole beneficiary, however, is to treat the account as your own. It is important to note that this calculator assumes that a spousal beneficiary is treating the inherited account as his or her own.
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* Please be sure to include the entire account fair market value. The year-end account value for the following assets are some examples of values that might not be included in a year-end statement value but should be included for RMD purposes:
- Non-marketable values, certain "penny stocks", or other unpriced securities.
- The value of any recharacterizations that took place after 12/31 of the year prior to distribution.
- The value of any 60-day rollovers not completed by 12/31 of the year prior to the distribution.
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Definitions
- 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 2011 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 fair market value 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.
- 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 ½.
- 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.
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This RMD was calculated using the information indicated above. As a matter of policy, Oppenheimer & Co. Inc. does not provide tax advice and we recommend that you speak with your own independent tax and/or legal advisor regarding the distribution of your annual required minimum distribution.
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