Required Minimum Distributions and Beneficiary Planning Flashcards
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Under SECURE 2.0, what is the required minimum distribution starting age for an individual born in 1955?
Answer: Age 73
Under SECURE 2.0, individuals born between 1951 and 1959 must begin RMDs at age 73, while those born in 1960 or later must begin at age 75.
What is the excise tax penalty for failing to take a required minimum distribution under SECURE 2.0?
Answer: 25% of the shortfall, reducible to 10% if corrected timely
SECURE 2.0 reduced the RMD penalty from 50% to 25% of the shortfall, further reducible to 10% if corrected within the IRS correction window.
How is a traditional IRA's required minimum distribution calculated each year?
Answer: Prior year-end balance divided by the applicable life expectancy factor
RMDs are calculated by dividing the account's December 31 prior-year balance by the applicable IRS life expectancy factor from the relevant table.
Which retirement account type is NOT subject to required minimum distributions during the original owner's lifetime?
Answer: Roth IRA
Roth IRAs are not subject to RMDs during the original owner's lifetime, making them a powerful tool for legacy planning and tax-free wealth transfer.
Which IRS life expectancy table do most IRA owners use when calculating their RMDs?
Answer: Uniform Lifetime Table
The Uniform Lifetime Table is used by most IRA owners for RMD calculations, regardless of whether a beneficiary has been named, unless the sole beneficiary is a spouse more than 10 years younger.
An IRA owner's sole beneficiary is a spouse who is 15 years younger. Which IRS life expectancy table should be used to calculate the owner's RMDs?
Answer: Joint Life and Last Survivor Expectancy Table
When the sole beneficiary is a spouse more than 10 years younger, the Joint Life and Last Survivor Expectancy Table may be used, producing a longer factor and lower annual RMDs.
Starting in 2024 under SECURE 2.0, which retirement account type was newly exempted from RMDs during the owner's lifetime?
Answer: Roth 401(k) plans
SECURE 2.0 eliminated RMDs for Roth accounts in employer-sponsored plans (Roth 401(k)s) beginning in 2024, aligning them with Roth IRA treatment for the owner's lifetime.