Message Font: Serif | Sans-Serif

No. of Recommendations: 0
Hi,
I'm helping my Mother with her taxes and finances. To calculate her Required Minimum Distribution from her IRA, I found the IRS chart for that purpose. The chart gives divisor numbers based on the life expectancy for ages above 70.

I'm just wondering how they figure life expectancy because their assumptions are very old! At age 85 my Mother has a life expectancy of 15 more years?! That's pretty optimistic, no?
Besides it doesn't really add up. Because if an 85 year old has a 15 year life expectancy, than a 100 year old would be zero. But at age 100, if she lives that long, she would then still have 6 years left?
And it finally gets down to under two years at age 115.

Seems kind of off, no?
Are they just being super liberal about the life expectancy in order to come up with a conservative MINIMUM distribution to allow people to keep more money in the IRA?

Thanks,
RB
No. of Recommendations: 1
I'm helping my Mother with her taxes and finances. To calculate her Required Minimum Distribution from her IRA, I found the IRS chart for that purpose. The chart gives divisor numbers based on the life expectancy for ages above 70.

I'm just wondering how they figure life expectancy because their assumptions are very old! At age 85 my Mother has a life expectancy of 15 more years?! That's pretty optimistic, no?
Besides it doesn't really add up. Because if an 85 year old has a 15 year life expectancy, than a 100 year old would be zero. But at age 100, if she lives that long, she would then still have 6 years left?
And it finally gets down to under two years at age 115.

Seems kind of off, no?
Are they just being super liberal about the life expectancy in order to come up with a conservative MINIMUM distribution to allow people to keep more money in the IRA?

No, those are reasonable life expectancies. If an 85 year old has 15 years of life expectancy, it means that half of the people who have survived for 85 years will live another 15. Half will not. if she survives to 100, you wouldn't expect her to drop dead immediately; instead she would have a good chance of living a few more years.

Look at it another way. The life expectancy of your grandmother when she was born was around 65-70 years. By your reasoning, she should have died 15 years ago when she reached her life expectancy. Unfortunately, many others died "early" (think war, illness, crime) to balance out her longevity.

Ira
No. of Recommendations: 0
Unless she has multiple IRAs and attempting not to take an RMD from all of them, the administrator will calculate the RMD and distribute it on the requested schedule.
No. of Recommendations: 0
I didn't know there were that many 100 year olds!
I guess I thought that was a lot more rare.
No. of Recommendations: 0
" Unless she has multiple IRAs and attempting not to take an RMD from all of them, the administrator will calculate the RMD and distribute it on the requested schedule."

I'll have to check on that. It seems like she just takes money randomly. Maybe since she always goes over the RMD fairly early in the year, they don't do an automatic schedule. Thanks for the heads up though. I'll check it out.

In Turbo Tax, when you enter the amount of distribution, it asks how much of it is RMD. But it doesn't change the bottom line whether it's all RMD or very little is RMD and most is over and above. So I was just wondering what the tax reason for indicating that is. Is it just to make sure AT LEAST the amount of RMD was taken? Or is there sometimes tax consequences for taking too much over the RMD?

Thanks,
RB
No. of Recommendations: 0
In Turbo Tax, when you enter the amount of distribution, it asks how much of it is RMD. But it doesn't change the bottom line whether it's all RMD or very little is RMD and most is over and above. So I was just wondering what the tax reason for indicating that is. Is it just to make sure AT LEAST the amount of RMD was taken? Or is there sometimes tax consequences for taking too much over the RMD?

There are significant tax penalties for taking less than the RMD. Since she is over 59 1/2, there is no penalty for taking distributions.
No. of Recommendations: 1
In Turbo Tax, when you enter the amount of distribution, it asks how much of it is RMD. But it doesn't change the bottom line whether it's all RMD or very little is RMD and most is over and above. So I was just wondering what the tax reason for indicating that is. Is it just to make sure AT LEAST the amount of RMD was taken?

Sounds like clumsy programming to me. I could see asking what the RMD for the year was, but since one can take one's IRA RMD from any account(s) one wishes, it's pretty meaningless with respect to a single payment.

Phil
No. of Recommendations: 0
"Sounds like clumsy programming to me."

Yeah, I think you are right.
No. of Recommendations: 0
I guess I thought that was a lot more rare.

Oh, it's rare enough. As of 2010 census, it's 53K persons, 80% of which are women.

http://www.census.gov/prod/cen2010/briefs/c2010br-09.pdf

But it is getting less rare. Thus, that number should be quite a lot higher in 2030, even adjusted for population gain. The problem is that when a person reaches 100, they typically don't live more than 1-3 more years (the 2-year expectancy at age 100). So, the numbers never really accumulate very much!

ETR