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Chapter 20. And Now It's Time to Retire > Minimum Distributions - Pg. 203

And Now It's Time to Retire 203 Okay, so it's your 70th birthday and you have to think about beginning withdrawals. The IRS would love it if you withdrew large amounts so that you get all that money out of your account before you die because that would mean you'd be paying taxes on it all. But people rarely take their money out in large withdrawals because we're living longer, and it's smart to spread out that money. So, the IRS determines the minimum amount that you must withdraw each year, based on life-expectancy tables. It used to be that you could use two methods to calculate your minimum distributions, the term- certain method and the recalculation method. Before you could figure out which method would be the best, you'd have to decide who the beneficiary of your plan would be. The calculations were complicated, especially under the recalculation method, and if you changed your beneficiary, it could seriously mess up your distribution planning. The good news is that there are new, simplified rules for minimum required distributions. In the year 2001, you can use the old rules or the new rules. Because the new rules are more beneficial to most people, and because, beginning in 2002, everyone will have to use the new rules, those are the ones we'll talk about here. Here are the highlights: · The uniform life-expectancy table applies to most IRA owners.This table (called the Minimum Distribution Incidental Benefit Table--isn't that a mouthful?) calculates life expectancy as if your beneficiary is 10 years younger than you. Yes, even if your beneficiary is your twin brother, you'll get the benefit of that 10-year spread, which results in lower required minimum distributions. If you're married and you're more than 10 years older than your spouse beneficiary, you're in luck --you get to use joint life-expectancy tables, which makes your required minimum distributions lower still. · There's no deadline to name a beneficiary.It used to be that you had to name a beneficiary by