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 recomputations.

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
91-94 skipped
	95			 8.6			11.63
96 to 99 skipped
	100			 6.3			15.87



========================  WARNING  =======================

                      AND DISCLAIMER
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.
==========================================================

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last update 9-16-02

IRA Minimum Distribution Rules

copyright © 2002 marvin e owen