Understand the IRS’s calculations and tables.
As much as you would like to, you can’t keep your money in your retirement account forever.
These investment vehicles include 401(k)s, IRAs, and similar retirement accounts.1 Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from your 401(k), IRAs, or other defined contribution plans in most circumstances. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
Another major change that occurred from the SECURE Act is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you had to stop making contributions at age 70½. Now, you can continue to make contributions as long as you meet the earned-income requirement.2
How do you determine how much your RMD needs to be? It depends on whether or not you’re married, and if you are, if your spouse is the sole beneficiary of your IRA and less than 10 years younger than you are. For everyone else, the Uniform Lifetime Table can help.
Keep in mind that this article is for informational purposes only, and the table below is meant to provide some guidance. The table is neither a recommendation nor a replacement for real-life advice. Always contact your tax, legal, or financial planner before making any changes to your required minimum distributions.
Uniform Lifetime Table (additional ages can be found on IRS.gov)
| Age Distribution | Period | Age Distribution | Period | Age Distribution | Period | Age Distribution | Period |
| 72 years old | 25.6 | 80 years old | 18.7 | 88 years old | 12.7 | 96 years old | 8.1 |
| 73 years old | 24.7 | 81 years old | 17.9 | 89 years old | 12.0 | 97 years old | 7.6 |
| 74 years old | 23.8 | 82 years old | 17.1 | 90 years old | 11.4 | 98 years old | 7.1 |
| 75 years old | 22.9 | 83 years old | 16.3 | 91 years old | 10.8 | 99 years old | 6.7 |
| 76 years old | 22.0 | 84 years old | 15.5 | 92 years old | 10.2 | 100 years old | 6.3 |
| 77 years old | 21.2 | 85 years old | 14.8 | 93 years old | 9.6 | ||
| 78 years old | 20.3 | 86 years old | 14.1 | 94 years old | 9.1 |
You can use the following formula to calculate a rough estimate of your RMD:
Determine the year-end balance of your account.
Find your age on the table and note the distribution period number.
Divide the total balance of your account by the distribution period. For example, say you’re 72, and your account balance is $100,000. Your RMD may be about $3,906, based on the table.
Calculating your RMD isn’t tricky, but understanding your RMD’s role in your overall retirement strategy can be complicated. It’s important to note that penalties can apply if you don’t follow the mandatory distribution guidelines. A financial planner is an excellent resource for guidance.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11650 S. State Street, Suite 360
Draper, UT 84020
Citations
1. IRS.gov, September 23, 2020
2. NerdWallet.com, November 26, 2020
3. Internal Revenue Service IRA Required Minimum Distribution Worksheet, 2020
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary, Inc., for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Advisor, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Fiduciary Report. Cities served in Utah are: Salt Lake County, Utah County, Park City, Salt Lake City, Murray, West Jordan, Sandy, Draper, South Jordan, Provo, Orem, Lehi, Highland, Alpine, American Fork.
