How do you calculate the RMD for a non-spouse beneficiary where the IRA owner died in 2006?
I can find multiple calculators online but not an actual formula/process. The multiple online calculators I looked at show a beneficiary born in 1943 to have a life expectancy of 7.7 years but table 1 in IRS Pub 590 says 11.2.
IRA owner died after the required beginning date (Age 91). Beneficiary is age 80.
Permalink Submitted by Alan - IRA critic on Fri, 2023-06-09 17:33
Beneficiary was 64 in 2007 and the initial divisor was 21.8. That divisor is reduced by 1.0 each year through 2021 (7.8). However, in 2022 the tables were updated and the divisor had to be reset to those of the new tables (23.7 in 2007 and 8.7 in 2022 with the 1.0 reductions, then 7.7 in 2023, 6.7 in 2024 etc. In other words, when resetting the divisor to the new tables, the new table divisor for age 64 in 2007 must be determined, then 1.0 subtracted for each year after 2007. You must reflect those annual reductions and should not use the current age to enter the table each year unless the beneficiary is a surviving spouse.
Permalink Submitted by Jon Steffen on Tue, 2023-06-20 18:54
The beneficiary was 64 in 2007 and with an adjusted 23.7 divisor from 2022 tables;What if they lived for more years than in the divisor, like 24 years? They would then be 88 and have a divisor of 23.7 – 24 = -0.3?How does the tax code deal with people who outlive their IRS life expectancy table?
Permalink Submitted by Alan - IRA critic on Tue, 2023-06-20 19:51
The inherited IRA is simply drained and nothing is left. There is no penalty for exhausting the balance. This cannot happen with an owned IRA from RMDs only, but of course could happen because of bad investments.
Permalink Submitted by PaulC on Wed, 2023-06-21 15:08
It’s good to note that inadvertent use of the old, and now obsolete, tables results in distributions that are higher than required, due to the former lower life expectancies and therefore smaller divisors. That means the error doesn’t produce any compliance issue. It does, however, result in distributions that exceed the actual RMD and drains the account somewhat faster than required.