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Turning 70 can be a confusing time for investors

Turning 70 can be a confusing time for investors

| July 31, 2018
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It begins the Required Minimum Distribution (RMD) phase for most types of retirement accounts.  This is mostly because the government wants you to take out money so you will have to pay taxes.  As a result, often these funds are at least partially unwanted.    

I was looking at my clients RMDs and thought it might be interesting to illustrate the minimum percentage of the account that must be withdrawn before the end of each year. 

Keep in mind, in the early years of the required minimum distribution period, the requirement for distribution is quite low; in fact, below 4%, which is actually a highly sustainable long-term distribution rate. 

As you can see from the chart, the minimum distribution requirements are for the most part quite manageable.  We do have a few clients in their 90’s that need to take out 9-15%, but most are around only 4-8% per year.

Keep in mind, it might also simplify your life to have federal and state taxes withheld from these distributions, so you can stop sending quarterly payments.  Be sure to coordinate with your accountant of course.  Fortunately, we help you with these calculations and check to make sure they are completed.  For those clients who don’t need the money, I usually recommend doing them in late November, so you have some time for your funds to grow

This is the table for most people, those that are one of the following: Unmarried, married owners with spouses 10 years younger or less, and married owners whose spouses aren't the sole beneficiaries of their IRAs. 

Age

Life Expectancy Factor

Percentage Required to be Withdrawn Annually

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

4.55%

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

8.33%

90

11.4

8.77%

91

10.8

9.26%

92

10.2

9.80%

93

9.6

10.42%

94

9.1

10.99%

95

8.6

11.63%

96

8.1

12.35%

97

7.6

13.16%

98

7.1

14.08%

99

6.7

14.93%

100

6.3

15.87%

101

5.9

16.95%

102

5.5

18.18%

103

5.2

19.23%

104

4.9

20.41%

105

4.5

22.22%

106

4.2

23.81%

107

3.9

25.64%

108

3.7

27.03%

109

3.4

29.41%

110

3.1

32.26%

111

2.9

34.48%

112

2.6

38.46%

113

2.4

41.67%

114

2.1

47.62%

115 and over

1.9

52.63%

 

Thanks for taking a look!

Tom Gartner, MSAPM, CFP®

 

This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.

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