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Pixie, do I have a problem?

I thought I knew what I was doing when I made my first required withdrawal from my IRA's for the year 1999. Now, after reading your essay 70 ½: Ya Gotta Take It Sometime plus some of your postings to this discussion board, I have some questions.

I have always done my own taxes and my own investments so I don't have a financial advisor or a tax accountant. This is a matter of pride and has always worked for me. Twice in the past, I hired a tax accountant to check my work when I had unusual situations, selling my house and income averaging because I had an unusual amount of income that year. Both times I was okay in my calculations. I have always kept abreast of changes in tax laws that affected me by clipping articles, reading pamphlets, and following the tax form directions carefully.

When it came to making my first required withdrawal from my IRA, I found little information. No recent articles, no pamphlets which actually discussed how to determine withdrawals, and no detailed discussion of the difference between the term certain and recalculation methods. I never did read a satisfactory account of the difference between the two methods.

So what I did was make numerous calls to the IRS, starting about a year ago, to find out how to calculate my withdrawal and later how to let the IRS know which method I was choosing, and who I was using as a beneficiary to calculate my MRD (my oldest child). The tax form didn't require answers to such questions, although everything I read indicated they might want to know. I can't say I was reassured by my talks with the IRS clerks who answered my phone calls; these folks seem to know little about MRD's. But I did finally believe that I was withdrawing the correct amount (and then some since I rounded up to the next thousand) and planned to continue withdrawing that amount forever unless I needed more. I thought I was using the term certain method, even though the IRS doesn't require you to report which method you are using.

Here, finally, are my questions:

1) What is the difference? In both cases, as you describe it in your article, you seem to be “recalculating.” Is it that in using term certain, you can continue to use the dollar value of your IRA's the first year that you made a required withdrawal? This would be an important advantage to me, since the value of my IRA's increased considerably between Dec. 1998 and 1999, and I would prefer to make withdrawals based on the lesser amount. If I have to use the amount at the end of 1999, I will have to withdraw a great deal more than I planned.
2) When you write “some IRA contracts may not permit the use of the recalculation method,” what are you talking about. My IRA's are spread through three mutual fund families, and I simply withdrew the required amount from one of the funds. Was I supposed to let all of the funds know what I was doing?

This is a long post, longer than necessary perhaps. But since I really prefer to know what I am doing myself, rather than turn my decisions over to a professional, I thought it was necessary to walk you through my thinking. Thanks for your help. I wish I had found this discussion board sooner.
Lucy




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