How To Calculate Your RMD, part 2

by | Oct 27, 2023 | Videos

Calculate Your RMD, part II

How to calculate your RMD, part II: in this video #357, Tom walks through a specific example of calculating a first year Required Minimum Distribution, or RMD.

You’ll need the values (as of 12/31 the year before) and also need the “life expectancy” tables provided by the IRS (link below).
Pay special attention to where assets are located (which types of accounts) – as some can be combined, some accounts cannot be combined to reach your total.
Here is the link to RMD video, Part one:

Prepare for a little math exercise as we go through how to calculate your RMD!

IRS tables:

#retirement #investing #certifiedfinancialplanner #RMD #requiredminimumdistribution

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Time Stamps for Calculate Your RMD, part II:

0:34  –  RMD example
0:59  –  How to calculate
1:14  –  Life expectancy tables needed
2:07  –  Where to take the RMD from?
2:52  –  Withholding taxes
3:12  –  Defer the first year RMD?

Transcript for Calculate Your RMD, part II:

We have more to talk about, in calculating your required minimum distributions, grab a pen and paper!

We’ve got a lot of great questions that came back after we put out the video on calculating your RMDs.

So we wanted to talk about it a little more, and walk through an example that might be helpful to folks who have questions about this.

Suppose you’re approaching age 73. You’re getting ready to calculate your first required minimum distribution. Let’s walk through an example of this.

Suppose you have a 401k balance that has $250,000.
And you’ve got an IRA that has $75,000.
And you’ve also got another IRA, that’s got $325,000.

Add them up you’ve got $650,000.

And you need to take your first required minimum distribution at age 73. How is that going to work?

Using the table that we referred to in the last video, we’re going to take the amount that needs to come out, and divide it by the life expectancy on the table.

That’s for this example, 26.5.
Works out to be just under 4%, or 3.77%.

So when you do the math, out of your 401k needs to come out $9,433.
Out of the bank IRA we’re going to be taking $2,830, or about $2,800 bucks.
And the brokerage IRA, where there’s $325,000 – you’re talking about $12,264.

Add them all up And you’re talking about a distribution of $24,527.

Can you take all of that from one account?
Sort of! Here’s the answer with that:

If everything were in IRA accounts, you could just say “hey, I’m going to take it all from this IRA over here.”
And you’ve satisfied everything.
You CAN combine for that purpose.

However, because you have – in this example – you have money in a 401k. You HAVE to take a distribution from the 401k.
And the minimum for that account is $9,433.

You can combine the other two IRAs, and take it out of either either account you want to take it from. Or you can take it out of both. That’s totally up to you.

You want to make sure that if you want to have taxes withheld, you can do that.

You can ask your bank or broker or your 401k plan administrator to withhold the taxes FOR you. So you won’t have a “tax bomb” waiting for you next April, when you go to file your taxes.

One other question that comes up: you CAN wait – you can defer – until April 1st of the year AFTER you turn 73, to take your first RMD, your first required minimum distribution.

We don’t like to see people do that.

That’s because it forces people – what they’re not thinking about is – you then have to take TWO distributions that year. So they’re doubling up on their tax bill as well.

There’s a lots of other examples we can walk through, but we wanted to show you this – because this question comes up a lot.

If you’ve got questions about required minimum distributions, just get in touch with us. We would be happy to walk you through it.

That’s the message for episode 357. Thanks for tuning in!

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