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March 22, 2021

Which of the 3 RMD Tables Must I use to Calculate my RMD?

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Which of the 3 RMD Tables Must I use to Calculate my RMD?

Which of the 3 RMD Tables Must I use to Calculate my RMD? I am 85 years old and must take required minimum distributions (RMD) from my traditional IRA for this year. I want to make sure that when I calculate my RMD, it is done correctly. I know that there are three RMD tables: The Single Life Expectancy Table, the Uniform Lifetime Table, or the Joint Life Expectancy Table. Which of the three tables must I use?

Answer: Which of the 3 RMD Tables you should use depends on the scenario. The following is a high-level explanation of each table.

Which of the 3 RMD Tables Must I use to Calculate my RMD?
Which of the 3 RMD Tables Must I use to Calculate my RMD?
  • The Single Life Table: Beneficiaries use this to calculate RMDs from inherited IRAs and other inherited retirement accounts. It may be used by beneficiaries who are eligible to take distributions under the life expectancy method. Therefore, it must not be used to calculate RMDs for your own IRA.
  • The Joint and Last Survivor Table: This is used to calculate RMDs for retirement account owners (not for beneficiary accounts) when the account owner’s spouse is the sole primary beneficiary and is more than 10 years younger than the account owner. Therefore, you would be able to use this table if:

o You are married

o Your spouse is your sole primary beneficiary, and

o Your spouse is age 74 or younger

 

  • The Uniform Lifetime Table: This is used to calculate RMDs for retirement account owners in all cases where the Joint and Last Survivor Table cannot be used. It assumes that the beneficiary is 10 years younger than the account owner regardless of the beneficiary’s age.

Bear in mind that your IRA custodian is required to send you an RMD statement by January 31 of the year for which you must take your RMD. The RMD statement must include your calculated RMD amount or an offer to calculate the amount upon request. Nevertheless, double-checking any RMD calculation provided by your custodian is recommended for the following reasons:

If you are eligible to use the joint life expectancy table, your IRA custodian is permitted to use the uniform lifetime table. Using the uniform lifetime table when you are eligible to use the joint life expectancy table, the calculation would result in a larger RMD than you are required to take. This is important for retirement account owners who want to take the lowest distribution amount possible.

If you have outstanding rollovers, outstanding transfers, and outstanding recharacterizations, those amounts must be added to your December 31 fair market value (FMV) when calculating your RMDs. Your custodian will not add these amounts, which will result in their calculated amount being lower than it should be. This could cause you to have an RMD shortfall, resulting in you owing the IRS a 50% excess accumulation penalty on the shortfall.

 

Outstanding amounts are assets that are not in the IRA as of the end of the year but legitimately credited to the IRA the following year. These are

  • Outstanding rollover: When an IRA owner takes a traditional IRA distribution one year and rolls over the amount to a traditional IRA the following year.
  • Outstanding transfer: When an IRA owner starts a trustee-to-trustee transfer from an IRA one year, and it is credited to the receiving IRA the following year.
  • Outstanding recharacterizations: A Roth conversion is made from a traditional IRA in one year and is recharacterized to a traditional IRA the following year. Please note: Roth conversions done after 2017 may not be recharacterized. This new provision was part of The Tax Cuts and Jobs Act (Pub. L. No. 115-97).

 

If your distributions for the year are less than your RMD, you may work with your tax advisor to ask the IRS for a waiver of the 50% excess accumulation penalty. This waiver is requested on IRS Form 5329. The IRS will waive the penalty if the failure to meet the deadline is due to ‘reasonable cause’.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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