This online IRA Distribution Calculator will attempt to forecast the future growth of your IRA, as well as the required minimum distributions (RMDs) that will begin once you reach age 70-1/2.
If you are the owner of a Traditional IRA or 401k, you are allowed to let your IRA grow tax-deferred, without making any withdrawals, until you reach age 70-1/2. At the point you are required to begin making minimum distributions from your IRA. And just like the non-required distributions you make, required distributions will increase your ordinary income by the amount of the distribution -- meaning the distributions will be taxed according to your marginal tax rate at the time of each distribution.
The actual amount you will be required to distribute is based on the IRS's forecast of your life expectancy, or on the joint life expectany of you and your spouse if your spouse is the sole beneficiary and is more than 10 years younger than you. IRS Publication 590-B (2014) (opens new window) includes 3 separate tables from which to determine your life expectancy (distribution factor).
The IRA Distribution calculator will forecast the future growth of your IRA, and then use the appropriate life expectancy table to forecast your required distributions once the age column reaches age 70-1/2. It will then both accumulate growth, and subtract RDMs.
Please keep in mind that the forecasted results of this calculator are merely estimates. As always, be sure consult your qualified tax professional before making any retirement investment decisions.
With that, let's use the IRA Distribution Calculator to forecast the future growth of your IRA, along with the required minimum distributions once they kick in.
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Required Minimum Distribution (RMDs): Required Minimum Distributions begin when the owner of a qualifying retirement plan reaches age 70-1/2. The distribution amount for the first year of the required distribution period can be deferred to the following year (for tax purposes), but must be distributed before April 1st. After that, distributions must me made prior to December 31st. The penalty for insufficient distributions is 50% of the undistributed amount.
Minimum Distribution Formula: In order to forecast the amounts of your required minimum distributions, you first need to look up your life expectancy factor in the IRS life expectancy tables -- one for each year you want to forecast. Then for each year, multiply the beginning balance by your expected return on investment (beginning balance x (1 + ROI)). Finally, divide each year-end balance of your IRA by the corresponding factor. Each result is the forecasted amount you well be required to distribute from your IRA for that year.
Expected Annual Return on Investment (ROI): The is the percentage by which you expect your IRA to grow each year. As with all financial forecasting, it is always best to forecast income low and expenses high. Therefore I suggest using a very conservative figure for expected annual return on investment.
IRS Life Expectancy Tables: Tables provided by IRS Publication 590-B for determining minimum distribution requirements for qualifying retirement plans. They are the the Single, the Joint Life and Last Survivor, and the Uniform Lifetime Table.