|
|
|
All participants now use the MDIB (minimum distribution incidental
benefit) table instead of the Joint or Single table.
|
|
|
|
The new MDIB (minimum distribution incidental benefit) table is simple: it
is the old joint life expectancy table devised to always calculate the
life expectancy based on the plan participant's age with a beneficiary 10 years
younger. This is true whether or not the participant has declared a beneficiary.
|
|
|
|
An exception to the above rule: if the beneficiary is a spouse who is actually
more than ten years younger than the participant, the participant may elect to
calculate the life expectancy factor with the spouse's actual age.
|
|
|
|
Beneficiary designations are no longer irrevocable. If fact, a participant
can designate a new beneficiary, or multiple beneficiaries at any time without
affecting the minimum distribution calculation.
|
|
|
|
After the participant's death, a spousal beneficiary may
transfer plan assets into his or her own IRA plan. RMD rules will be the
same thereafter as if this was his or her own plan from inception.
|
|
|
|
Non-spouse beneficiaries still use the 1986
rules (single life expectancy table with no annual recalculation). For
these calculations select the Required Minimum Beneficiary Distribution (RMBD)
calculations or press the F3 key to create a new RMBD illustration. |
|
|
Benefits to Retirees
|
|
|
|
Since the new formulas generally reduce the amount retired people are required to withdraw from their pension plan
each year, the balance their retirement fund can grow for a longer period of time.
|
|
|
|
To calculate the difference the new rules make,
consider a single person age 70 with a $100,000 balance in his IRA. The RMD under the 1986 rules is $6,250 whereas
now it would be only $3,817. This $2,433 difference left to compound at
7% interest for 10 years would nearly double. The cumulative difference
over 10 years would be over $35,000, which is a major benefit to a
person who believes they will need more money in their 80's than they
will in their 70's. |
|
|
|
Similar savings would be experienced by a 70-year-old married to a
73-year-old; the RMD for a $100,000 account would be $5,155 under the
old rules and only $3,817 under the new regulations. |
|
|
Benefits to Financial Advisors
|
|
|
|
Service is the key to getting and keeping customers. The financial advisor must have detailed information
about each qualified plan a customer holds before he/she can perform the RMD Calculation.
|
