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Required Minimum Distribution (RMD)The IRS requires that you withdraw at least a minimum amount — known as a Required Minimum Distribution — from your retirement accounts annually, starting the year you turn age 70 1/2. Determining how much you are required to withdraw is an important issue in retirement planning. Use this calculator to determine your Required Minimum Distribution.
Definitions
- Calculation notes
- This calculator follows the latest IRS rules and life expectancy tables, which were finalized on April 16, 2002. These new IRS regulations were optional in 2002 but became mandatory as of January 1, 2003. This calculator was last updated January 2005 to ensure compliance with IRA rules and regulations. If you have questions, please consult with your own tax advisor regarding your specific situation.
- Account balance as of 12/31 of year prior to distribution year
- This is the fair market value of your account as of the close of business on December 31 of the preceding year. For IRAs, no adjustments are made for contributions or distributions after that date. If you made a transfer or rollover from one account on or before December 31 of the preceding year and the funds were received by a new account in the next year, you will need to increase your December 31 fair market value by the amount that was transferred or rolled over and not included in the December 31 value of either account.
- Your age as of 12/31 of distribution year
- Use your age as of 12/31 for the year you are calculating the distribution.
- Beneficiary age
- Use the age your beneficiary will turn on their birthday for the year you are receiving the distribution.
- Estimated rate of return
- 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 type of investments you select. From January 1970 to December 2005, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.4% per year. During this period, the highest 12-month return was 61%, and the lowest was -39%. Savings accounts at a bank pay as little as 1% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are 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.
- Is your birthday after June 30th?
- Check this box if your birthday is after June 30. This is a factor in determining whether the IRS requires you to begin distributions when you are age 70 or 71. 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 1 and June 30, the first year of distribution would be at age 70. If your birthday is between July 1 and December 31, the first year of distribution would be at age 71.
- Is your sole beneficiary a spouse?
- Check this box if your only beneficiary is your spouse. This can be a factor in determining whether the IRS uniform table must be used or if you are able to use the Joint Life Expectancy Table.
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.
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Lincoln Investment Planning, Inc. Can Help
Lincoln Investment Planning, Inc. has specialized since 1968 in providing retirement planning
services. A Lincoln Investment financial representative can help you understand the rules about Required Minimum Distribution.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
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