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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3750
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I have approximately 1 million dollars in my 401k and IRA accounts.

Customer Question

I have approximately 1 million dollars in my 401k and IRA accounts. It's my understanding I must withdraw a certain amount when I turn 70 1/2. How much am I required to withdraw and is there a formula.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi, yes you are correct. In general, you must begin withdrawing money by April 1 of the year following the year that you turn 70½.

NPVAdvisor :

While I am pulling up an excellent overview of the formula and it's logic, you may want to take a look at this: http://apps.finra.org/Calcs/1/RMD

NPVAdvisor :

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.

NPVAdvisor :

Your required minimum distribution is the minimum amount you must withdraw from your account each year.

  • You can withdraw more than the minimum required amount.
  • Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).
NPVAdvisor :

If you want to calculate the amount by hand IRS provides worksheets ... and you will use on of two different tables, depending on your situation; if your spouse is the sole beneficiary and is more than 10 years younger than you, you'll use the Joint Life and Last Survivor Expectancy Table ... FOr everyone else, use the Uniform Lifetime Table

NPVAdvisor :

Using the calculator I provided the link for, above ...

NPVAdvisor :
Previous Year-End Account Balance
Full Size Image
Age at Year-End
Full Size Image
[Make a Selection] 70 (Birthday On or After July 1st) 70 (Birthday On or Before June 30th) 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115
Withdrawal Factor
Full Size Image

Results

Required Minimum Distribution Analysis
Summary
Required Minimum Distribution $36,496.35
Required Rate of Return 3.790 %
Note: To maintain your account balance following your withdrawal, your required return for next year must match the Required Rate of Return above.
Important Information About This Calculator

Important: The required minimum distribution calculator was designed to help investors determine their required minimum distribution amounts based on IRS requirements. While it is a helpful tool, you should understand its limitations. This tool assumes that distributions will be made at the beginning of each year. If end of year distributions were assumed the results could be higher. Changes in marital status, death of an account owner or a change in beneficiary age can all impact results. Married users whose sole primary beneficiary is a spouse more than 10 years younger must use the Joint Life Expectancy Table inIRS Publication 590, which will generally produce lower required distributions. Because of these factors, your results will be higher or lower than those shown.
NPVAdvisor :

Sorry, that format transfer was atrocious, but to give you a fee, I used 1,000,000 and their required rate of return of 3.79% and age 70 as assumptions and that returned

Required Minimum Distribution $36,496.35
Required Rate of Return 3.790 %
NPVAdvisor :

The other assumptions I made were that your birthday occured on or before June 30th and that you were 70 years old ... this returned a withdrawal factor of 27.4

NPVAdvisor :

1,000,000 divided by 27.4 = 36,496 per year

NPVAdvisor :

Let me know if you have questions

Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 1 year ago.

Hi Wayne,

Because the formatting did not transfer well I thought I'd follow-up by recapping here for you:


Required Minimum Distribution $36,496.35

Let me know if you have questions

Lane


Expert:  Lane replied 12 months ago.
Hi Wayne,


I'm just following up with you to see how everything is going. Did my answer help?


Let me know,
Lane

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