What is the minimum withdrawal you must make from the retirement? You, as a beneficiary, can withdraw the benefits from a retirement plan anytime he wants. But, you will be charged immediately with taxes after you withdraw your inherited money. That’s the reason you may want to delay withdrawal and defer the tax payments. However, IRS has implemented certain rules regarding the minimum withdrawal you must make and pay taxes on that amount. This calculator is specially designed to compute the minimum distribution required by beneficiary.
This calculator was designed using the new rules and life expectancy tables of IRS and was last updated on 2012. You must consult with your tax advisor for rules applicable for your economic condition.
Account balance as of 12/31 of year prior to distribution year
Your actual size of the account balance as on 31st December of the previous year.
Account owner’s age at death
The account owner’s age at the time of death. If this age is less than the age of the beneficiary, the account owner’s estimated life expectancy is used to calculate the RMD after his death.
Beneficiary age as of 12/31 of the year following the owner’s death
The age of the retirement plan beneficiary as of 31st December of the following year after the death of the account owner. For example, if the account holder died in anytime during 2012, you need to enter your age as of 31st December, 2013.
Beneficiary age as of 12/31 of the distribution year
The age of the beneficiary as of 31st December of the distribution year.
Estimated rate of return (provides an estimate of future RMDs)
Your anticipated rate of return from the account. This is only a prediction of future account balances (note that it will have a bearing on the required minimum distribution). The investments you select will be a determining factor in the actual rate of return. The annual compound rate for the S&P 500 for the ten years ending on the 31st of December 2012 was an average of 7.1% and included reinvestment of dividends. The S&P 500’s average annual compound rate of return from January of 1970 to the 31st of December 2012, with reinvestment of dividends included, were roughly 10.1% (source: www.standardandpoors.com). The highest return for a 12 month period since 1970 was 61% (for the months of June 1982 through June 1983). March 2008 through March 2009 rendered the lowest return of 43%. Although bank savings accounts can pay as little as or less than 0.25%, they carry a lower risk of loss of principle balances.The scenarios above are hypothetical, as the rates of return cannot be accurately forecasted for the future. As well, investments that yield higher rates of returns are subject to having a higher risk and volatility. Over time, particularly for long-term investments, the rate of return will vary greatly. The possible loss of principle on your investments should be considered. Other fees and sales charges may be required by investment or funds companies and are not indicated in the compound rate of return mentioned above, and a direct investment in an index is not possible.
Is account owner beneficiary’s spouse?
If you are the sole beneficiary and the original owner of the account was your spouse, then you can handle the account you inherited as your own account. This offers the most flexibility and is typically the best choice for a beneficiary of this type. This calculator presumes that this is the option you will choose to take. With this box checked, the normal distribution applies to the account owner. This includes, but is not limited to, the requirement of distributions to begin when you reach the age of 70 1/2.
Is beneficiary’s birthday after June 30th?
If the birthday of the beneficiary comes after the 30th of June, you should check this box. This factor will be used to determine whether or not the IRS will require accounts inherited by spouses to begin distributions when the beneficiary reaches age 70 or age 71. The IRS states explicitly that beneficiaries are to use the date they turn 70 1/2 for calculating the first year of distribution. As an example, if the beneficiaries birthday falls between the 1st of January and the 30th of June then they would use the age 70 to calculate the first year of distribution. If the beneficiary’s birthday falls between the 1st of July and the 31st of December then the beneficiary will use the age of 71 to calculate the first year of distribution.
Did account owner die after Required Begin Date?
If the owner of the account died following the date requiring the distribution to begin, you need to check this box.