last update 9-16-02
IRA Minimum Distribution Rules
Although the IRS first proposed regulations in 1987 to establish minimum
distribution rules for IRAs, it was only on April 16, 2002 that the regs
were made final. They are officially to take effect on January 1, 2003 but
the IRS has stated that Taxpayers may rely on these regs during 2001.
The first rule is that when a person reaches age 70 1/2, he must begin
taking distributions from his IRAs. Actually, the rule says that the first
distribution must actually be taken on or before April 1 of the year
following the attainment of age 70 1/2. Thus, the IRA owner can defer
the receipt til the next year.
Although the IRS will all an IRA owner to defer the receipt of the first
distribution until April 1 of the next year, the distribution for that
next year will also have to be taken in that year resulting in two
distributions in that second year. It may be better to go ahead and take
the distribution in the first year but that is a choice to be decided
upon based on the facts of the situation.
Basically, the amount of the distribtion is an amount that will completely
payout all of the IRA over the remaining life of the IRA owner. The IRS
has developed a table that shows what the theoretical remaining life is
and that table is set out further in this paper.
The IRA owner has two options in using the table. First, he can begin it
age age 70 1/2 and continue with the same percentage distribution in each of the
remaining years. Under this method, the rate is fixed in the beginning and
remains the same for the remainder of his life.
The other method is to recompute the remaining life expectancy under the
table each year. The concept is that each year that you live longer, there
is a chance that you will continue to live longer. Therefore, the table
is constantly changing as the age increases. By electing to recompute the
amount of the distribution each year, the IRA owner can keep the distributions
as small as possible.
If the IRA beneficiary is a spouse who is more than 10 years younger than the
IRA owner, then there is another joint and last survivor table (not included
here) that can be used in lieu of the initial table.
If the IRA owner dies prior to beginning to take distributions, then the
beneficiary will need to begin taking distributions but can use his own
life expectancy from a Single Life Table (also not included herein).
If the IRA owner has begun to take distributions when he dies, then the
beneficiary must take the account over the longer of (1) the remaining
table for the owner or (2) his own remaining life but without the annual
If the beneficary is the surviving spouse, then she could roll the proceeds
over into an IRA of her own tax-free and keep the proceeds there without
a requirement of distributions until she reaches age 70 1/2.
There are a number of detailed rules for the IRA Minimum Distributions and
this paper does not attempt to present all of them. Prior to making plans
relating to an IRA, a person should review their situation with a professional
to get complete information and advice about what to do.
The table to be used by the IRA owner to take his distributions beginning at
age 70 1/2 is as follows:
Years of Percent
Age Distribtion each Year
70 27.4 3.65%
71 26.5 3.77
72 25.6 3.91
73 24.7 4.05
74 23.8 4.20
75 22.9 4.37
76 22.0 4.54
77 21.2 4.72
78 20.3 4.93
79 19.5 5.13
80 18.7 5.35
81 17.9 5.59
82 17.1 5.85
83 16.3 6.13
84 15.5 6.45
85 14.8 6.76
86 14.1 7.09
87 13.4 7.46
88 12.7 7.87
89 12.0 8.33
90 11.4 8.77
95 8.6 11.63
96 to 99 skipped
100 6.3 15.87
======================== WARNING =======================
This information is provided for the reader's benefit in
becoming familiar with the legal matters discussed. Your
particular facts may be different from the points above.
You should not rely on the above data without consulting a
attorney to discuss the specific facts of your case
and the law of your state.
If you live in Louisiana and want to talk about your situation, please
call me at:
Marvin E. Owen
3036 Brakley Drive
Baton Rouge, La 70816
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