Your beneficiary's actual age is no longer material to the MRD calculation, adding estate planning flexibility with respect to your retirement plans and IRAs.

This year, the IRS simplified and made the rules more flexible concerning the required minimum distributions (MRDs) that employer retirement plan participants, IRA owners, and 403(b) plan participants are required to take each year after they turn 70 1/2. In addition, the new rules reduce the minimum required distribution amount. Of course, you may withdraw more than the minimum if you wish and if your employer's plan permits.

The new lower MRD amounts are based on an IRS table that assumes, for calculation purposes, that your beneficiary is 10 years younger than you. If your spouse is your sole beneficiary and is more than 10 years your junior, you can use your spouse's actual age instead, producing an even lower MRD. Under previous rules, your beneficiary's age became a permanent part of the MRD calculation. Even if you named a new beneficiary, you were locked in to calculations based on the age of the beneficiary designated at the time you turned 70 1/2. Because the new rules assume that all beneficiaries (see spousal exception above) are 10 years younger than you, your beneficiary's actual age is no longer material to the MRD calculation, adding estate planning flexibility with respect to your retirement plans and IRAs.

Administrators of 401(k) and other employer plans have until next year to adjust their plans to the new minimum distribution rules, but may apply the new rules this year. For IRAs, taxpayers may use the new rules immediately.

The above article is for general information only and is not intended to provide specific advice or recommendations for any individual. Consult your attorney, accountant, or financial or tax advisor with regard to your individual situation. © Mutual of America September 2001. All rights reserved.

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