Archive for the ‘retiree’s IRA value’ Category
How Will a Retiree’s IRA Value Change While Taking Out the Minimum Each Year?
If you have a traditional (i.e. deductible) individual retirement account (IRA), you may wonder how much you’ll have in it when you die for legacy purposes. You must make minimum required distributions (MRDs), but if you restrict your withdrawals to these minimums, I can give you an idea. I’ll assume that you make it to 70 years of age, you’re the owner of your IRA, and you’ll withdraw your yearly MRD starting at age 70.
The amount you’re required to withdraw each year for your MRD is simply the value of your IRA at the end of the preceding year divided by the Internal Revenue Service’s ‘remaining life expectancy’ for your age. This remaining life expectancy can be found in the IRS-life expectancy table – in IRS Pub 590, Appendix C, table III. This table is only for IRS owners who are not married or married with a spouse less than 10 years younger; it’s not for beneficiaries who must use table I.
You’ll see that your remaining life expectancy decreases usually by about 0.8 years – but not by 1.0 year for each year you get older. That’s because your projected statistical age of death (50/50 chance) actually increases as you get older. Nevertheless, when determining your MRD each year, you’ll be dividing by a smaller number – since your remaining life expectancy (i.e. the years you statistically have left to live) is always getting smaller. This means you’ll be taking out a somewhat larger fraction of whatever is in your IRA holdings at the end of the previous year every year.
