- Expenses for secondary education
- First $10,000 attributed to the purchase of a first home
- Systematic Withdrawals (see Rule 72t)
- Expenses exceeding 7.5% for medical purposes, death, disability, and health insurance if the individual has been unemployed for 12 consecutive weeks.
An IRA owner must start to take Required Minimum Distributions at age 70 1/2. (see RMD table)
The beneficiary (ies) of an investor’s IRA account should be the person or people who would inherit the assets of the IRA account upon the death of the IRA owner. The beneficiary should be one of the following:
- One Individual
- Multiple Individuals
- Qualifying Trust
- Estate, charity or non-qualifying trust
A Stretch IRA allows the beneficiaries to stretch the income from an IRA. The Stretch IRA requires minimum distributions to be taken over his/her lifetime based on the beneficiaries’ life expectancy. Please consult your tax adviser for more information.
Required Minimum Distributions
Example: Brian is a retired 401(k) participant who turned 70-1/2 on March 31. On December 31 of last year, the ending balance in his 401(k) was $262,000. To calculate his RMD for this year, he divides $262,000 by his life expectancy factor of 26.5 years. His distribution amount is $9,886.79.
|Account balance / Life expectancy factor = RMD|
IRS Uniform Lifetime Table
(Use this table for calculating lifetime RMD’s from IRAs and retirement plan accounts.)
|Account Owner’s Age*||Life Expectancy Factor||Account Owner’s Age*||Life Expectancy Factor|
72t – Equal and Substantial Payments
Excerpt from www.IRS.gov
Section 72(t)(2)(A)(iv) provides, in part, that if distributions are part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancy) of the employee and beneficiary, the tax described in section 72(t)(1) will not be applicable. Pursuant to section 72(t)(5), in the case of distributions from an IRA, the IRA owner is substituted for the employee for purposes of applying this exception. Section 72(t)(4) provides that if the series of substantially equal periodic payments that is otherwise excepted from the 10-percent tax is subsequently modified (other than by reason of death or disability) within a 5-year period beginning on the date of the first payment, or, if later, age 59 1/2, the exception to the 10-percent tax does not apply, and the taxpayer’s tax for the year of modification shall be increased by an amount which, but for the exception, would have been imposed, plus interest for the deferral period.