No. of Recommendations: 0
My mother passed away in 2009. The 4 of us (her children) were listed as beneficiaries on her IRA. I want to know how the MRD(?) is figured. Some simple formula that I can plug in the numbers to "approximate" how much I will get every year.

When the 4 of us filled out our forms, we specified a yearly payment based on life expectancy. None of us cashed out or took the 5 year option.

I've tried to read the IRS info and I get crosseyed and my brain turns to mush. I am the oldest. Last year, the distribution we got was the same. Will it be the same every year because it's based on my life expentancy.

I just need somethig in plain English and some kind of formula.
a*b/c= d

And if all else fails, I will call the mutual fund that holds the IRA and I will ask them.

Thanks!
Crocket
Print the post Back To Top
No. of Recommendations: 0
Was your mother taking required distributions from the IRA prior to her passing?
The IRS generally refers to this as RMD (Required Minimum Distribution) but I know some institutions call it MRD.
I'm not sure there is a simple formula since it is tied to your age and uses a factor from the IRS Publication 590. Since your age changes each year the factor to determine the distribution changes.

Bob
Print the post Back To Top
No. of Recommendations: 0
Yeah, she was 80 at the time. And I think I remember reading somewhere that it's based on my age when she was 70. So I guess every July, I'll be surprised when extra money shows up in my checking account.

Crocket
Print the post Back To Top
No. of Recommendations: 0
The answer to your question lies in IRS Publication 590 http://www.irs.gov/pub/irs-pdf/p590.pdf
Check page 18, pages 33-36, and the appropriate table from the Appendix.

Bob
Print the post Back To Top
No. of Recommendations: 2
Yeah, she was 80 at the time. And I think I remember reading somewhere that it's based on my age when she was 70. So I guess every July, I'll be surprised when extra money shows up in my checking account.

My father left me a portion of his IRA a few years ago, when he was in his eighties. So I think we're in much the same situation.
The amount that is the RMD each year is based on your own life expectancy and the value of the IRA as of the end of the last trading day of the previous year. (It doesn't have anything to do with your age when your mother was 70.) I'm also not sure why you're mentioning July. You can withdraw your RMD at any time during the year -- it doesn't have to be any particular month. And it shouldn't come as a "surprise." I have Vanguard as the custodian of my inherited IRA and they can either send the money each year on a date that I specify, or merely inform me of the amount that I have to take -- and then it's up to me to make sure to withdraw (at least) that amount before the year is out.

culcha
Print the post Back To Top
No. of Recommendations: 0
The amount that is the RMD each year is based on your own life expectancy and the value of the IRA as of the end of the last trading day of the previous year. (It doesn't have anything to do with your age when your mother was 70.)

I remember something about the value of the IRA at the end of the last trading day of the previous year......that is one number in the equation and I can get that. I would just need to know the "number" they use for my life expectancy. Does that change as I get older?

I'm also not sure why you're mentioning July. You can withdraw your RMD at any time during the year -- it doesn't have to be any particular month.

When I filled out all the paperwork for the transfer, I guess I must have specified July as the payment month. I only take one payment a year. Muhlenkamp Fund (MUHLX) is the custodian.

Crocket
Print the post Back To Top
No. of Recommendations: 0
I remember something about the value of the IRA at the end of the last trading day of the previous year......that is one number in the equation and I can get that. I would just need to know the "number" they use for my life expectancy. Does that change as I get older?

I believe that in your case your life expectancy is found in Table I of Appendix C.
So if you are 55 years old, your life expectancy is 29.6 years. This means that the percentage of this years withdrawal is 1 divided by 29.6 or about 3.38%. Multiply this percentage by the IRA value at the end of the prior year to get the dollar amount that will be withdrawn.
Your life expectancy gets smaller by a little less than 1 year for each year you age.

Bob
Print the post Back To Top
No. of Recommendations: 0
What Bob said with one addition:

The life expectancy is based on the oldest beneficiary when there is more than one non-spouse bene and you leave it all in one account.

It is based on individual life expectancy if you separate them by the end of the year following the year of the original owner’s death, then each bene gets to treat his own inherited portion as if he were the sole bene.

This could save you some money in taxes in the long run.
Print the post Back To Top