Retirement Distribution Planning

IRA/Retirement Plan Distributions

Specific steps must be followed to avoid penalties and excessive income taxation on IRA and other retirement plan distributions occurring prior to age 59 ½.  In addition, other specific rules must be followed to comply with mandatory IRA distributions at age 70 ½.  Beneficiary selections on these retirement accounts have an important impact on the amount and duration of minimum required distributions.  Our firm specializes in evaluating these and other circumstances, providing the calculations and identifying several distribution planning strategies.

New Proposed Regulations on Required Minimum Distribution Rules for IRA & Retirement Plans

 On January 11, 2001, The Government released substantial revisions affecting all taxpayers who hold retirement assets (IRA and qualified retirement plans). Shortly thereafter, President Bush issued a hold on ALL regulations enacted within the past 60 days. Most experts believe the hold will have no impact on these new proposed regulations as the changes are right in line with the President’s agenda.

The new proposed regulations have the greatest impact on all taxpayers age 70 ½ or older. These taxpayers must take Required Minimum Distributions from their IRA and retirement plan accounts. The new rules may substantially reduce the required minimum distribution.

The mandatory application of these regulations is January 1st 2002. Taxpayers have the option to apply the new proposed regulations beginning January 1, 2001.

In a nutshell, the new proposed regulations:

  1. Provide a simple uniform table to determine the minimum required distribution required during their lifetime. This uniform table is easier because you:
    • No longer need to determine your beneficiary by age 70 ½ in order to select a computation method.
    • No longer need to decide whether to use joint or single recalculation, term certain or hybrid method. Everyone uses the same table (except for taxpayers with a spouse beneficiary who is 10 years or more younger).
      Now, if you don’t like the minimum distribution method you selected years ago, it can be changed. You can change beneficiaries as often as you like. The bottom line is this:

The new calculation table allows most taxpayers to reduce their required minimum distribution by 20% to 30%.

The primary example where the distribution amount will not be reduced is for (IRA) taxpayers who have listed non-spouse beneficiaries (typically their children). Please contact our office to review how the new proposed regulations may impact your circumstances.