Required Minimum Distribution (RMD) - with Stretch Projection

Required Minimum Distribution (RMD) - with Stretch Projection Definitions

Calculation notes

IMPORTANT! This calculator has been updated for SECURE 2.0 of 2022, the SECURE Act of 2019 and the CARES Act of 2020. Future IRS published procedures may have an impact on enforcement and interpretation of these Acts.

Allowing the beneficiary of a retirement account to stretch out distributions over their life time, often referred to as a Stretch IRA, has been significantly impacted by the SECURE Act of 2019. Previously, all beneficiaries had this option. With the new law only designated eligible beneficiaries are allowed this type of minimum distribution. If you are not a designated eligible beneficiary, you have until December 31^st of the year that contains the 10th anniversary of the original account owner's death to withdraw all funds from the account. There are no minimum withdrawals during this 10 year period, but all funds must be withdrawn before the deadline to avoid significant penalties. Designated eligible beneficiaries are a surviving spouse, a child of the account owner (but generally only until they are 18, at that point the 10 year rule begins) or a chronically ill individual. For more information please see Modification of Required Distribution Rules for Designated Beneficiaries.

The CARES Act of 2020 provided a temporary waiver of RMDs. The RMD waiver is for retirement plans and accounts for 2020. RMDs are also waived for IRA owners who turned 70 1/2 in 2019 and were required to take an RMD by April 1, 2020 and have not yet done so.

Even with the SECURE Act of 2019 it is still possible to Stretch your distributions. 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. To accomplish this, we do the following:

If you have your spouse as the beneficiary of the account:

1. The IRA owner names his/her spouse as sole primary beneficiary of the IRA. While alive, the IRA owner begins taking RMD payments at age 75 (or 70 1/2 if you were born before 7/1/1949, 72 if your were born before 1/1/1951, 73 if you were born before 1/1/1960), using a factor from the IRS Uniform Lifetime Table to calculate the distribution (unless the spouse is more than 10 years younger than the owner and is the owner's sole beneficiary).
2. 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 age 72 ( or 70 1/2 if born before 7/1/1949) based on the Uniform Lifetime Table.
3. Upon the surviving spouse's death, beneficiaries have until the end of the year that contains the 10th anniversary of the spouse's death to withdraw all funds. There are no minimum distributions required, but for our illustration we assume distributions happen evenly over the 10 years.

If your beneficiary is not a spouse:

1. The IRA owner names a beneficiary or beneficiaries of the IRA. While alive, the IRA owner begins taking RMD payments at age 75 (or 70 1/2 if you were born before 7/1/1949, 72 if your were born before 1/1/1951, 73 if you were born before 1/1/1960) using the Uniform Distribution Table to calculate the distribution.
2. Upon the death of the IRA owner, beneficiaries have until the end of the year that contains the 10th anniversary of the original account owner's death to withdraw all funds. There are no minimum distributions required, but for our illustration we assume distributions happen evenly over the 10 years.

The Stretch IRA Strategy is still 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.

A proposed rule for the SECURE Act was released on February 23, 2022. When finalized the new rule will change the way the RMDs are treated for non-spouse Designated Beneficiaries that use the SECURE Act 10-year rule for distributions. It is likely this new rule will be retroactive to all of 2022. Originally the required distributions under the 10-year rule required all funds to be withdrawn end of the year in which includes the 10th anniversary of the account owner's death without regard to RMDs.

The proposed rule requires a beneficiary to withdraw an RMD for year 1 through 9 if the original account owner had already begun taking RMDs themselves. The remainder would then be required to be withdrawn in its entirety in year 10. Note that year's 1 through 9 have a required minimum distribution, any amount over the minimum is acceptable and will not incur penalties.

As of 9/30/2022 the proposed rule has not been finalized. Our current calculator illustrates evenly distributing distributions over a 10-year period when the 10-year rule applies. This will exceed the RMD requirement in all but a few circumstances. The RMD may not be sufficient if the applicable remaining life expectancy of the beneficiary is less than 10 years. It is strongly advised you seek professional guidance in all RMDs and especially with beneficiary RMDs.

Owner name

Please enter the account owner's name.

Owner birthdate

Please enter the account owner's birthdate.

Name of account

Please enter the name of the account for this analysis.

Hypothetical Interest rate

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 31^st 2021, had an annual compounded rate of return of 13.6%, including reinvestment of dividends. From January 1, 1970 to December 31^st 2021, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 11.3% (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

Please enter the plan type. The plan type will not affect the calculations, it is used for descriptive purposes only.

Add beneficiary checkbox

Add beneficiary projection is a concept to potentially help extend the period of tax-deferred earnings beyond the lifetime of the original account owner. The concept works as follows:

With Spouse as First Beneficiary

1. The original account owner names his/her spouse as sole primary beneficiary of the account. While alive, the original account owner begins taking RMD payments at age 70-1/2, using the Uniform Distribution Period Table to calculate the distribution (unless the spouse is more than 10 years younger than the owner).

2. Upon the death of the original account owner, the surviving spouse rolls over the funds to his/her own qualified account. Any RMD amount from the deceased spouses's account cannot be rolled over. The surviving spouse names a new beneficiary, such as children, and begins taking RMD at age 75 (or 70 1/2 if you were born before 7/1/1949, 72 if your were born before 1/1/1951, 73 if you were born before 1/1/1960) based on the Uniform Distribution Table.

3. Upon the surviving spouse's death, beneficiaries are required to take distributions. The beneficiaries generally take distributions based on the life expectancy of the oldest beneficiary.

With Non-spousal First Beneficiary

1. The original account owner names a beneficiary or beneficiaries. While alive, the original account owner begins taking RMD payments at age 75 (or 70 1/2 if you were born before 7/1/1949, 72 if your were born before 1/1/1951, 73 if you were born before 1/1/1960) using the Uniform Distribution Table to calculate the distribution.

2. Upon the death of the original account owner, the beneficiaries are required to take distributions. The beneficiaries generally take distributions based on the life expectancy of the oldest beneficiary.

The technique is designed for individuals who will not need the funds for their own retirement needs.

The figures created for the projection 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. The figures do not represent past or guarantee future performance of any specific product. Actual rates of return may vary and are not guaranteed.

Owner's assumed death

When calculating for the projection, we use this date as the assumed death of the account owner.

Is beneficiary a spouse? Checkbox

Check this box if your only beneficiary is your spouse. 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.

We also use this entry for the projection to determine whether to calculate for a spouse's beneficiary life expectancy.

Beneficiary birthdate

Please enter the account beneficiary's birthdate.

Beneficiary name

Please enter the beneficiary's name.

Beneficiary's assumed death

When calculating for the projection, we use this date as the assumed death of the account's beneficiary. This is only used if the beneficiary is a spouse.

Spouse's beneficiary birthdate

When calculating for the projection and the original beneficiary of the account is a spouse, we use this birthdate to determine the life expectancy of the spouse's beneficiary.