- Calculation Notes
- Stretch Calculation Notes
- The strategy assumes that you will take the smallest amount of money from the IRA that the law allows, and at the latest time it allows, without penalty. This is accomplished by the following rules below:
If you have your spouse as the beneficiary of the account:
- The IRA owner names his/her spouse as sole primary beneficiary of the IRA. While alive, the IRA owner begins taking RMD payments at their required age, using a factor from the IRS Lifetime Tables to calculate the distribution.
- Upon the death of the IRA owner, the surviving spouse rolls over the funds to his/her own IRA. Any RMD amount that was not taken for the year of death from the deceased spouse's IRA cannot be rolled over. The surviving spouse names a new IRA beneficiary, such as a child, and begins taking RMD at their required age based on the Uniform Lifetime Table.
- Upon the surviving spouse's death, beneficiaries will have 10 years beginning with the year after the spouse's death to withdraw all funds. There minimum distributions are only required if the spouse had already started RMDs, however, for our illustration we assume distributions happen evenly over the 10 years. We also assume that the beneficiaries are not considered "Eligible Designated Beneficiaries" which may be able to further stretch out the time-frame of distributions.
If your beneficiary is not a spouse:
- The IRA owner names a beneficiary or beneficiaries of the IRA. While alive, the IRA owner begins taking RMD payments at their required age using the Uniform Distribution Table to calculate the distribution.
- Upon the death of the IRA owner, beneficiaries will have 10 years beginning with the year after the original account owner's death to withdraw all funds. There minimum distributions are only required if the account owner had already started RMDs, however, for our illustration we assume distributions happen evenly over the 10 years. We also assume that the beneficiaries are not considered "Eligible Designated Beneficiaries" which may be able to further stretch out the time-frame of distributions.
The Stretch IRA Strategy is only for those who do not need their entire IRA to cover their living expenses. The figures created with this calculator are hypothetical and based on current and variable assumptions you selected to help illustrate a concept. Many factors could impact this hypothetical concept, such as possible changes to tax laws in the future, the impact of inflation and other risks. You should consider the effect of inflation on the assets included inside of the IRA, as inflation will erode purchasing power over time. You should remember that assets included inside of the IRA are subject to market risk, including the possible loss of principal. You should consider the fact that tax laws and IRS rules may change over time, potentially limiting the effectiveness of the Stretch IRA strategy.
- Owner's name
- Please enter the account owner's name.
- Name of account
- Please enter the name of the account for this analysis.
- Owner's birthdate
- Please enter the account owner's birthdate.
- Hypothetical 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 dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2023, had an annual compounded rate of return of 15.2%, including reinvestment of dividends. From January 1, 1970 to December 31st 2023, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.9% (source: www.spglobal.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.
- Amount subject to RMD
- Investment account, mutual fund accounts and fixed annuity contracts use the previous year-end value. Variable annuity contracts use the actuarial year-end contract value, which may include living and death benefits, when determining the RMD amount. For variable annuity contracts, contact the issuing company for this information.
- Plan type
- This is the plan type for the account. It is a factor in determining if an RMD is required. If you choose a ROTH IRA plan type, no RMD has ever been required for the original account owner. All other ROTH plan types follow the normal RMD rules through 2023. ROTH plans of all types have eliminated RMDs for the original account owner for years 2024 and later. Other plan types are used for descriptive purposes only and do not impact any calculations.
- Owner's assumed age at death
- When calculating for the projection, tool uses the age entered as the assumed age death of the account owner.
- Is sole beneficiary a spouse?
- Check this box if your only beneficiary is your spouse. The new IRS rules use the Uniform Lifetime 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. The tool also uses this entry to determine whether to calculate for a spouse's beneficiary's life expectancy.
- Beneficiary's birthdate
- Please enter the account beneficiary's birthdate.
- Beneficiary's name
- Please enter the beneficiary's name.
- Beneficiary's assumed age at death
- When calculating for the projection, tool uses the age entered as assumed age of death of the account's beneficiary at the end of the year. This is only used if the beneficiary is a spouse.
- Spouse's beneficiary's birthdate
- If the first beneficiary is a spouse of the original account owner this tool will include a spouse's beneficiary. The tool assumes that the spouse's beneficiary is not a new spouse and isn't a designated eligible beneficiary and will be using the 10-year distribution rule.