Advanced Underwriting Consultants

Question of the Day – November 30

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: I have a client who is taking RMDs from her IRA.  When should she expect that her account will be completely distributed?

Answer: In theory, the account could last for as long as the taxpayer is alive—even if she lives to age 115 or older.

RMD distributions are calculated based on the age the account owner will be turning in the current year, and using the account balance as of the last day of the prior year.  The factor to be used for most taxpayers is taken from the IRS’s Uniform Lifetime Table, which is reproduced below.

Age Distribution Period Age Distribution Period
70 27.4 93 9.6
71 26.5 94 9.1
72 25.6 95 8.6
73 24.7 96 8.1
74 23.8 97 7.6
75 22.9 98 7.1
76 22 99 6.7
77 21.2 100 6.3
78 20.3 101 5.9
79 19.5 102 5.5
80 18.7 103 5.2
81 17.9 104 4.9
82 17.1 105 4.5
83 16.3 106 4.2
84 15.5 107 3.9
85 14.8 108 3.7
86 14.1 109 3.4
87 13.4 110 3.1
88 12.7 111 2.9
89 12 112 2.6
90 11.4 113 2.4
91 10.8 114 2.1
92 10.2 115 and over 1.9

If the account owner has turned 80 in 2011, for example, and the IRA account balance was $100,000 on 12/31/2010, the RMD for 2011 is calculated by dividing the account balance ($100,000) by the table factor for an 80 year old (18.7).  That yields an RMD of $5,348 for 2011.

Since the RMD factors never reach one, even at age 115, so long as there is money in the IRA, the account can theoretically continue without being fully exhausted.  Eventually, though, if the taxpayer lives long enough, the account balance will get so small that it will make no practical sense to keep the IRA intact.

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