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Greetings, Rizzo, and welcome.

<<A relative is about to turn 70 1/2 years old and must make a decision on how to accept payout of an IRA account with a balance of about $10,000 dollars. Any ideas? Lump sum vs. distributions? Where to put money?>>

Unless your relative likes paying taxes before they're due, a lump sum distribution hardly seems worth it. The account balance isn't huge, but whatever it earns still remains tax deferred until withdrawal. If the money isn't really needed for living expenses, I would go with a withdrawal computed on the joint life expectancy of the owner and a beneficiary using the "without recalculation" method. You can see IRS Pub 590, Individual Retirement Arrangements, for details.

In brief, using IRS life expectancy tables you find the applicable joint life expectancy factor and divide that into the value of the IRA as of 12/31/97. For fun, say the value was $10K and the factor is 10. That means $1K of the IRA must be removed by 12/31/98 or get zapped by a 50% penalty for failure to do so. Next year the factor becomes 9, and that gets divided into whatever the IRA is worth on 12/31/98 for that year's required minimum distribution. Each year, the factor declines by 1, so once established the joint life expectancy factor does not change. That makes sure the money comes out consistently and over a specified number of years, but until all funds are removed the rest can enjoy the benefits of tax deferred compounding in the interim.

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