April 18 - DISTRIBUTIONS FROM TRADITIONAL IRA
Traditional IRA –
Traditional/Roth IRA Contribution Limits
Traditional & Roth IRAs
Plan Name
Standard Limit Catch-up Limit (Age 50 and older )
2015 Traditional $5,500
$6,500
*MAGI Limits:
Single: $116,000 but < $131,000
Married Filing Joint: 183,000 but < $193,000
ADJUSTED GROSS INCOME PHASE-OUT RANGES
No plan IRA MAGI limit

Contribution is deductible if
- not already involved in a retirement plan or
- below phase amounts
IRA Catch-up Contributions
IRA holders age 50 or older may contribute an amount in excess of the basic
annual contribution, as follows:
$1,000 extra
Additional QRP Assets May be Rolled to IRAs
Under the terms of this legislation, after-tax assets held in QRPs, will now be
eligible for rollover to an IRA.
IRA Distribution, Rollover Changes
Certain IRA balances will now be eligible to be distributed and rolled over to
qualified retirement plans, including 401(k), 403(b). The IRS has been directed
to update the life expectancy tables for RMD purposes. The IRS is granted
statutory authority to extend the 60-day period for completion of a rollover,
where circumstances beyond the control of the IRA holder prevent timely
completion.
These provisions will result in greater flexibility for IRA holders in distributing
1
and moving assets, both among IRAs and among various other retirement
arrangements. As a result, IRAs will be more popular than ever as vehicles for
accumulating, holding and directing taxpayers' retirement assets
IRA Contributions
* Return and possibly contribution is taxed
deferred
* If withdraw before 59.5 years old, withdrawal will be taxed and with a
10% penalty on withdrawal
DISTRIBUTIONS FROM TRADITIONAL IRA
* Withdrawals can be made before 59.5
without penalty (will be taxed) if
- Disability
- College Tuition
- Purchase of first home ($10,000)
- Payment of medical expenses
- Medical insurance premiums - must
receive unemployment for 12 wks
- Death distribution to beneficiary
* Withdrawals for Substantially Equal
Amounts using the following methods
- Life Expectancy Method
- Amortization method
- Annuitization Method
SUBSTANTIALLY EQUAL PAYMENTS
* Substantially equal payments must
continue until age 59.5 or if started after
age 54.5 they must last at least 5 years.
* Amount of payment method cannot
change without a retroactive imposition
of a 10% penalty on all prior pay outs
(unless you become disabled or die)

All pay outs are taxed as income
2
Federal, State & Local (No FICA)
* Between age 59.5 and 70.5 any amount
can be withdrawn without penalty but will
be taxed.
SUBSTANTIALLY EQUAL AMOUNTS – Withdrawals before 59.5
without a 10% penalty
Assume withdrawals are made on January 1
Assume 6% growth in portfolio per year
A 45 year old man with $4 million in IRAs – balance from previous December 31.
**** Life Expectancy Method
Age
Distribution amount
45
$4 million / 38.8 = $ 103,093
(38.8 factor from Single Life Table)
-
(37.8 = 38.8 factor reduced by 1)
46
$4,130,722 / 37.8 =
$109,278
($ 4million – 103,093) * 1.06 = $ 4,130,722
Must take payment each year until age 59.5
-
Between 59.5 years to 70.5 take any amount of money from retirement plan or $0
-
At age 70.5 each individual is required to take distributions
**** Amortization Method – Distributions before age 59.5
Assume 45 year has IRAs worth $4 million (previous Dec 31)
Assume a 6.5% return on the portfolio
38.8 N
6.5 I/Y
-4,000,000 PV
CPT PMT
Must withdraw this amount until age 59.5
**** Annuization Method
3
Similar to amortization method except use factor from annuity tables
REQUIRED MINIMUM DISTRIBUTIONS FROM
TRADITIONAL IRAs, 401-K’s

After age 70.5 it is required that a certain minimum amount must be removed from
an individual’s Traditional IRA every year.
* Must receive first distribution no later than April 1 of the calendar year following the
year in which the individual turns 70.5.
* If one takes less than the required amount, a 50% penalty is imposed on the difference
between what was taken and the required minimum amount

Minimum required distributions are based on the prior year-end balance of IRA.
RMD – Required Minimum Distributions at age 70.5
If Draw Less Than RMD Then 50% Penalty on Amount Not
Withdrawn
RMDs AFTER AGE 70.5

Uniform Lifetime Table is normally used
RMD is recalculated every year
Assume a $5 million Balance on prior Dec. 31 and 6% growth rate
RMD are taken on January 1
Age
Balance
70
$5 million /
71
72
Factor
RMD
27.4
=
$182,482
(Uniform Lifetime Table)
$5,106,569 / 26.5
=
Recalculation
$
/
=
4
*** Use Uniform Lifetime Table with spouse beneficiary unless the spouse is more than
10 years younger than the owner, then use the Joint Life Table.
-
Assume spouse is the IRA beneficiary and the owner is 70.5 and the spouse is 55
years old.
Age
Balance
Factor
70
$5 million /
$160,771
71
$
$
72
$
31.1
=
(Joint Life Table)
/
30.1
=
Recalculation
RMD
Required Beneficiary Distributions – If Owner Dies
Before Age 70.5

If IRA owner dies before 70.5 years old the pay out to the beneficiary can be made
two ways:
-
5-year pay out. The IRA must be distributed to the beneficiary no later than
the December 31st of the 5th year following the IRA owner's death.
-
Life Expectancy Payments. Payments start no later than December 31st of
year following the IRA owner's death. Term certain method must apply if
beneficiary is not surviving spouse - spouse can use term certain or
recalculation method. This is default method.
-
Surviving Spouse Options. Surviving spouse beneficiary has same options
as above plus
1) Leave IRA as is and take withdrawals and start taking RMDs (Required
Minimum Distributions) when deceased spouse would have turned 70.5
2) Fresh start - roll the IRA over into his or her own IRA, then start taking
Distributions at age 70.5.
5
If IRA Owner Dies Before 70.5 Years Old

Non-spouse Beneficiary –
-
Take balance by 5th anniversary of year of death
Single Life Expectancy Term Certain

Spouse Beneficiary –
-
Fresh Start
Wait and take owner would have began taking withdrawals at 70.5 years old
Take Balance by 5th anniversary of year of death
Single Life Expectancy Recalculation
-
-
Example of withdrawals by non-spouse beneficiary if owner dies at age 69.5
Non-Spouse beneficiary is age 46
Age
46
Balance in IRA Previous Dec 31
$4,500,000
Factor
/
Withdrawal
=
47
Factor - 1
RMD – Required Minimum Distributions at age 70.5
If Draw Less Than RMD Then 50% Penalty on Amount
Not Withdrawn
Assume a $5 million Balance on prior Dec. 31 and 6% growth rate
RMD are taken on January 1. Required distributions to owner using Uniform
Lifetime Table are
Age
Balance
Factor
70
$5 million /
71
$
=
(Uniform Lifetime Table)
=
Recalculation
/
RMD
6
72
$
*** Use Uniform Lifetime Table with spouse beneficiary unless the spouse is more than
10 years younger than the owner, then use the Joint Life Table.
-
Assume spouse is the IRA beneficiary and the owner is 70.5 and the spouse is 55
years old.
Age
Balance
Factor
RMD
70
$5 million /
31.1
=
(Joint Life Table)
71
$
72
$
$160,772
Recalculation
AFTER IRA OWNER DIES & RMDs HAVE COMMENCED

Nonspousal Beneficiary - After IRA dies the RMD to the beneficiary is based upon
the beneficiary's individual life expectancy, starting no later than December 31st of
the year following the year of death. Each RMD thereafter is based on that life
expectancy less one. (Table below)

Spousal Beneficiary - RMD for the spouse after the death of the IRA owner is
based on the surviving spouse's life expectancy, starting no later than December 31st
of the year following the year of death. This life expectancy is recalculated each
year.

The Spouse can always select fresh start.

Death without a designated beneficiary - If the IRA owner has no beneficiary or
has a trust or estate as beneficiary, RMDs are calculated using the deceased IRA
owner's life expectancy, starting no later than December 31st of the year of death.
Each RMD thereafter is based on that life expectancy less one year.
Designating a Beneficiary - The beneficiary does not have to be determined until
distributions to the designated beneficiary must begin. So, if there are a number
beneficiaries, some may disclaim themselves.
7
Payout to Beneficiary at Death of Owner After RMD
Has Commenced
* Non-Spouse Beneficiary – Age 48 Owner Dies at 73
Age
Balance
Factor
RBD
48
$5,295,756 /
=
$
(Single Life Expectancy Table)
49
Spouse As Beneficiary – Owner Dies at 73
* Spouse could roll over IRA into his or her own and begin RMD when he or she
reaches 70.5
* Spouse could continue with owner IRA distributions
* Spouse can use his or her single life expectancy recalculation method
Spouse Distributions Using His Or Her Single Life Expectancy (Recalculation)
Spouse is 58 years old
Age
Balance
58
$5,381,291 /
59
***
Factor
27.0
=
(Single Life Table)
$5,492,903 / 26.1
=
Recalculation
RBD
$199,307
$
No Beneficiary (estate or charity are beneficiaries) and death of owner after age
70.5 - RMD is calculated over owner’s life had he or she lived (term certain)
8
The following table is used for determining the distribution period for
lifetime distributions to an account holder.
The above table is used regardless of whether or not the IRA owner
has designated a beneficiary. Each year the life expectancy divisor is
used recalculated each year.
Example: Billy Bob turns 70.5 in 2012 and decides to
start his RMDs. His IRA is worth $100,000 at the end of
2011. He has no beneficiary. What is the first RMD
amount?
- December 31, 2011 Billy Bob has $110,000 in the IRA ,
how much is the RMD in 2012?
The Michael Douglas Rule: if the sole beneficiary is a
spouse who is younger by a difference of more than 10
years, the Uniform Lifetime Distribution Table (above) is
not used but instead the Table below which uses the actual
joint life expectancies of the married couple is used.
RMD withdrawals using the new life
expectancy tables. To calculate
your required annual withdrawal,
divide the amount in your
retirement savings by the number
in the divider column.
Age
Divider
70
27.4
71
26.5
72
25.6
73
24.7
74
23.8
75
22.9
76
22.0
77
21.2
78
20.3
79
19.5
80
18.7
81
17.9
82
17.1
83
16.3
84
15.5
85
14.8
86
14.1
87
13.4
88
12.7
89
12.0
90
9
2012 Joint Life Expectancy Table
Age of
your
beneficiary
Your age
70
71
72
73
74
75
76
77
78
79
80
40
44.0
44.0
43.9
43.9
43.9
43.8
43.8
43.8
43.8
43.8
43.7
41
43.1
43.0
43.0
43.0
42.9
42.9
42.9
42.9
42.8
42.8
42.8
42
42.2
42.1
42.1
42.0
42.0
42.0
41.9
41.9
41.9
41.9
41.8
43
41.3
41.2
41.1
41.1
41.1
41.0
41.0
41.0
40.9
40.9
40.9
44
40.3
40.3
40.2
40.2
40.1
40.1
40.1
40.0
40.0
40.0
40.0
45
39.4
39.4
39.3
39.3
39.2
39.2
39.1
39.1
39.1
39.1
39.0
46
38.6
38.5
38.4
38.4
38.3
38.3
38.2
38.2
38.2
38.1
38.1
47
37.7
37.6
37.5
37.5
37.4
37.4
37.3
37.3
37.2
37.2
37.2
48
36.8
36.7
36.6
36.6
36.5
36.5
36.4
36.4
36.3
36.3
36.3
49
35.9
35.9
35.8
35.7
35.6
35.6
35.5
35.5
35.4
35.4
35.4
50
35.1
35.0
34.9
34.8
34.8
34.7
34.6
34.6
34.5
34.5
34.5
51
34.3
34.2
34.1
34.0
33.9
33.8
33.8
33.7
33.6
33.6
33.6
52
33.4
33.3
33.2
33.1
33.0
33.0
32.9
32.8
32.8
32.7
32.7
53
32.6
32.5
32.4
32.3
32.2
32.1
32.0
32.0
31.9
31.8
31.8
54
31.8
31.7
31.6
31.5
31.4
31.3
31.2
31.1
31.0
31.0
30.9
55
31.1
30.9
30.8
30.6
30.5
30.4
30.3
30.3
30.2
30.1
30.1
56
30.3
30.1
30.0
29.8
29.7
29.6
29.5
29.4
29.3
29.3
29.2
57
29.5
29.4
29.2
29.1
28.9
28.8
28.7
28.6
28.5
28.4
28.4
58
28.8
28.6
28.4
28.3
28.1
28.0
27.9
27.8
27.7
27.6
27.5
59
28.1
27.9
27.7
27.5
27.4
27.2
27.1
27.0
26.9
26.8
26.7
60
27.4
27.2
27.0
26.8
26.6
26.5
26.3
26.2
26.1
26.0
25.9
10
61
26.7
26.5
26.3
26.1
25.9
25.7
25.6
25.4
25.3
25.2
25.1
62
26.1
25.8
25.6
25.4
25.2
25.0
24.8
24.7
24.6
24.4
24.3
63
25.4
25.2
24.9
24.7
24.5
24.3
24.1
23.9
23.8
23.7
23.6
64
24.8
24.5
24.3
24.0
23.8
23.6
23.4
23.2
23.1
22.9
22.8
65
24.3
23.9
23.7
23.4
23.1
22.9
22.7
22.5
22.4
22.2
22.1
66
23.7
23.4
23.1
22.8
22.5
22.3
22.0
21.8
21.7
21.5
21.3
67
23.2
22.8
22.5
22.2
21.9
21.6
21.4
21.2
21.0
20.8
20.6
68
22.7
22.3
22.0
21.6
21.3
21.0
20.8
20.6
20.3
20.1
20.0
69
22.2
21.8
21.4
21.1
20.8
20.5
20.2
19.9
19.7
19.5
19.3
70
21.8
21.3
20.9
20.6
20.2
19.9
19.6
19.4
19.1
18.9
18.7
Source: IRS Joint and Last Survivor Table; 26 CFR Part 54 Section 401(a)(9)-9
ROTH IRA
Roth IRA - contributions are not tax deductible. Money grows tax free and is not taxed
when withdrawn if
Income phase out MAGI – single $114,000-$129,000
Married filing jointly $181,000-$191,000
- cannot withdraw until age 59.5
- money must be in Roth IRA for at
least 5 years
- can pull out original contribution
without penalty
- do not have to withdraw at 70.5 years
Roth IRA –
* Eligible to make a regular contribution to a Roth IRA even if you participate in a
retirement plan maintained by your employer. The contribution is not tax deductible on
income tax return, but the return is not taxable if withdrawn after age 59.5.
* Contributions can be as much $5,500 (If you're 50 or older by the end of the year, add
another $1,000 beginning in 2006 – same Traditional IRA.)
* There are just two requirements.
1) You or your spouse must have compensation or alimony income equal to the
amount contributed.
11
Table I
(Single Life Expectancy)
(For Use by Beneficiaries)
Age Life Expectancy Age Life Expectancy
0
82.4
28
55.3
1
81.6
29
54.3
2
80.6
30
53.3
3
79.7
31
52.4
4
78.7
32
51.4
5
77.7
33
50.4
6
76.7
34
49.4
7
75.8
35
48.5
8
74.8
36
47.5
9
73.8
37
46.5
10
72.8
38
45.6
11
71.8
39
44.6
12
70.8
40
43.6
13
69.9
41
42.7
14
68.9
42
41.7
15
67.9
43
40.7
16
66.9
44
39.8
17
66.0
45
38.8
18
65.0
46
37.9
19
64.0
47
37.0
20
63.0
48
36.0
21
62.1
49
35.1
22
61.1
50
34.2
23
60.1
51
33.3
12
24
59.1
52
32.3
25
58.2
53
31.4
26
57.2
54
30.5
27
56.2
55
29.6
Table I (continued)
(Single Life Expectancy)
(For Use by Beneficiaries)
Age Life Expectancy Age Life Expectancy
56
28.7
84
8.1
57
27.9
85
7.6
58
27.0
86
7.1
59
26.1
87
6.7
60
25.2
88
6.3
61
24.4
89
5.9
62
23.5
90
5.5
63
22.7
91
5.2
64
21.8
92
4.9
65
21.0
93
4.6
66
20.2
94
4.3
67
19.4
95
4.1
68
18.6
96
3.8
69
17.8
97
3.6
70
17.0
98
3.4
71
16.3
99
3.1
72
15.5
100
2.9
73
14.8
101
2.7
74
14.1
102
2.5
75
13.4
103
2.3
76
12.7
104
2.1
13
77
12.1
105
1.9
78
11.4
106
1.7
79
10.8
107
1.5
80
10.2
108
1.4
81
9.7
109
1.2
82
9.1
110
1.1
83
8.6
111+ 1.0
14