1. Withdrawals from IRAs: When owner is between 59 ½ & 70 ½ ; & When owner turns 70 ½ MontGuide200309 Marsha A. Goetting, MSU Kristen G. Juras, School of Law, University of Montana Revised 2003

2. Marsha A. Goetting MSU Extension Family Economics Specialist P. O. Box 172800 Montana State University Bozeman, MT 59717 406-994-5695

3. 6 MontGuides 1.Individual Retirement Accounts 2.Shopping for an IRA 3.Withdrawals from IRAs  When owner is under 59 ½  When owner is between 59 ½ & 70 ½; turns 70 ½ 4.Inheriting an IRA: Planning techniques  Primary beneficiaries  Successor beneficiaries

4. Individual Retirement Accounts www.montana.edu www.montana.edu Search: Search: Individual Retirement AccountsIndividual Retirement Accounts

5. IRA Tax Law Changes Economic Growth & Tax Relief Reconciliation Act of 2001Economic Growth & Tax Relief Reconciliation Act of 2001

6. Withdrawals Between a ge 59 ½ & 70 ½Between a ge 59 ½ & 70 ½  No penalty  Subject to state & federal income tax

7. IRA Withdrawal Bruce’s income $29,000Bruce’s income $29,000 Withdraws +$15,000Withdraws +$15,000 Taxable income = $44,000Taxable income = $44,000 Withdrawal “Lost” to taxes = $3,450 Withdrawal “Lost” to taxes = $3,450

8. Withdrawals Age 70 ½ Age 70 ½  Required Minimum Distributions (RMD) 70 ½

9. Required Beginning Date April 1 April 1  Following year in which IRA owner reaches 70 ½

10. Born June 30, 1933 Reaches 70 ½ Reaches 70 ½  December 30, 2003 RMD for 2003 RMD for 2003  By April 1, 2004 RMD for 2004 RMD for 2004  By December 31, 2004

11. RMD Based upon Owner’s ageOwner’s age Beneficiary designationBeneficiary designation Account balanceAccount balance

12. Uniform Life Table Used to compute IRA owner’s RMD yearlyUsed to compute IRA owner’s RMD yearly  Page 3 Table 1

13. Uniform Life Table Based on: Based on:  Joint life expectancy  Recalculated each year  Hypothetical beneficiary  10 years younger

14. Uniform Life Table Page 3, Table 1 Page 3, Table 1 Age Distribution Period Age Distribution Period 7027.4 7027.4 7522.9 7522.9 8018.7 8018.7 8514.8 8514.8

15. Bob, age 70 IRA balance IRA balance  $176,000 Distribution period Distribution period  27.4 (Table 1, page 3) RMD RMD  $176,000  27.4 = $6,423

16. Recalculated each yr Age Balance Factor Age Balance Factor 71 IRA $$$ ÷ 26.5 71 IRA $$$ ÷ 26.5 72 IRA $$$ ÷ 25.6 72 IRA $$$ ÷ 25.6 73 IRA $$$ ÷ 24.7 73 IRA $$$ ÷ 24.7 74 IRA $$$ ÷ 23.8 74 IRA $$$ ÷ 23.8 75 IRA $$$ ÷ 22.9 75 IRA $$$ ÷ 22.9

17. What if beneficiary is more than 10 years younger than IRA owner? Doesn’t matter!!!!! Doesn’t matter!!!!!  Uniform Lifetime Table for withdrawal calculations must be used

18. What if spousal beneficiary is more than 10 years younger? Different TableDifferent Table

19. Joint Life & Last Survivor Table Based on Based on  Owner’s Age  Beneficiary’s Age Page 4, Table 2 Page 4, Table 2

20. Hersh (78) & Mary (67) IRA balance IRA balance  $40,000 Distribution period Distribution period  21.0 (Table 2, page 4) RMD RMD $40,000  21.0 = $1,905 $40,000  21.0 = $1,905

21. Recalculated each yr Hersh & Mary Hersh & Mary Ages Balance Factor Ages Balance Factor 79 & 68 IRA $$$ 20.179 & 68 IRA $$$ 20.1 80 & 69 IRA $$$ 19.380 & 69 IRA $$$ 19.3  

22. Why important to correctly calculate RMD? 50% penalty 50% penalty

23. Question #9 What was the median $$$$ withdrawal from Traditional IRAs in tax year 2002? What was the median $$$$ withdrawal from Traditional IRAs in tax year 2002?

24. Answer: #9 Median Traditional IRA withdrawal in 2002 Median Traditional IRA withdrawal in 2002  $7,800

25. Withdrawals from IRAs: When owner is between 59 ½ & 70 ½ ; & When owner turns 70 ½ MontGuide200309 Marsha A. Goetting, MSU Kristen G. Juras, School of Law, University of Montana Revised 2003