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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Im turning 70-1/2 on 8/21/13. Can you show me the tax rate

Resolved Question:

I'm turning 70-1/2 on 8/21/13. Can you show me the tax rate schedule for annual IRA min distribution and do I pay tax on that distribution for all of 2013 or 6 months.
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.

Good Morning.

First, from the IRS website:


QUESTION:

When is the deadline for receiving a RMD from an IRA?

ANSWER:

An account owner must take the first RMD for the year in which he or she turns 70 ½.

However, the first RMD payment can be delayed until April 1st of the year following the year in which he or she turns 70 ½.

For all subsequent years, including the year in which the first RMD was paid by April 1st, the account owner must take the RMD by December 31st of the year.




Also, from the same IRS, Required Minimum distribution site:

QUESTION:

How is the amount of the RMD calculated?

ANSWER:

Generally, a RMD is calculated for each account by dividing the prior December 31st balance of that IRA or retirement plan account by a life expectancy factor that IRS publishes in Tables.

Depending on how you have your beneficiary set up you'll need to use one of these tables(just click on the link)to calculate the amount you're required to pull.

The Joint and Last Survivor Table is used by an account owner whose sole beneficiary of the account is his or her spouse and is more than 10 years younger than the account owner;

http://www.irs.gov/pub/irs-pdf/p590.pdf#page=96


The Uniform Lifetime Table is used by account owners whose spouse is not the sole beneficiary or whose spouse is not more than 10 years younger;

http://www.irs.gov/pub/irs-pdf/p590.pdf#page=110




On your question about the taxation of the IRA distribution...

The distribution is simply added to any other income you have for that tax year to come to your total income for tax purposes.

You can have your IRA custodian withhold taxes (just like a W-2 form from work). Either way, they'll send you a 1099 form each January, for doing your taxes that April.




Finally, here's the IRS website that tells you all about it as well:

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions




Hope this helps

Lane

Positive feedback (or an “accept”) is highly appreciated. That’s how we’re paid. HOWEVER, if you need CLARIFICATION, COME BACK here. Also, feel free to bookmark this page to come back for reference.


Expert:  Lane replied 2 years ago.

Tom,

As a follow-up, here's an excellent online calculator.

You just enter 4 things (the calendar year, your IRA balance, your birthday and your beneficiary setup) and it calculates the IRS required minimum distributions for you:

http://individual.troweprice.com/public/Retail/Retirement/Required-Minimum-Distributions/Calculate-My-RMD/RMD-Calculator


On last thing: You can always take more than the required MINIMUM, but if you don't take out at least the required minimum amount, they'll hit you with a 50% on what you pulled out.

Lane


Customer: replied 2 years ago.

I wanted to know the % of the IRA must be pulled each year after 70-1/2. Sorry if I was unclear, that's wat I meant by schedule. If you could follow up I'd appreciate your answer. Thanks for your timely response to my question.

Expert:  Lane replied 2 years ago.

Sure, it's not really based on a percentage. (Well, it is, but you have to use the table to figure the percentage).

OR use that calculator I showed you.

If you want to ballpark (estimate)the number, it's going to be about 1/15 (because the average mortality table will say, on the average, a 70 year old has about 15 years ... on average)

So 1 divided by 15 = 6.7% or so

So, if you have 100,000 in your IRA at the end of the year, the minimum amount you must take out is $6,667.


If you'll hang on I'll go find the table and give you the actual percentage (just remember that it changes a little each year, because every year your mortality table factor changes a little bit)

Be right back ...






Expert:  Lane replied 2 years ago.

OK, sorry ... I was trying to kill ya off too early :)

The table puts a 70 year old, who's birthday is XXXXX before June 30th (that's you) at 27.4 years.

That's a withdrawal factor of 27.4.

So the PERCENTAGE for you FOR THIS YEAR is 3.79%


So if you had 100,000 in your IRA at December 31st 2011, you would need to withdraw $3,649.64.

Your percentage is 3.79%


Lane
Expert:  Lane replied 2 years ago.


Tom,



Just to recap, you're percentage for this year is 3.79%.



And if you do want to use an on-line calculator to figure your distribution, ...

I've found one from a government agency FINRA that's more clear, easy to use and isn't cluttered with advertising:

http://apps.finra.org/Calcs/1/RMD




Hope this helps.

Positive feedback appreciated ... an accept or positive feedback is the only way JustAnswer will pay us. BUT, if you need more on this please come back...

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4526
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 2 years ago.

Thanks for the feedback Tom.

Let me know if I can help further.



To ask for me again, just say “For NPVAdvisor” at the beginning of you question OR enter it here:

http://www.justanswer.com/finance/expert-npvadvisor/

…pleasure working with you!


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Lane
Lane
JD, MBA, CFP, CRPS
3658 Satisfied Customers
Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986