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RMDs and subtracting one - an old wives' tale?
Old 09-30-2019, 06:47 PM   #1
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RMDs and subtracting one - an old wives' tale?

Hi all,

I don't take RMD's yet, but my Dad has for the past 10 years or so.

RMD's are calculated by the 12/31 balance of the year before divided by a divisor. There are a few IRS tables in which you can look up the divisor, depending on the circumstances under which you are taking the RMD.

After the first year, there are two possible ways to get the divisor for the second and subsequent years:

1. Take the previous year's divisor and subtract one. For example, you were 70 last year and used 27.4, so this year you should use 27.4 - 1.0 = 26.4.

2. Look up the new divisor in the applicable IRS table based on the person's current age. For example, you were 70 last year and used 27.4, so this year you are 71 and should use 26.5.

I've seen #1 mentioned multiple times on this board, and I've promulgated it myself. I think it's wrong.

#2 seems to be the way Vanguard does it, and seems to match the IRS instructions for how to calculate it.

Can anyone confirm that method #2 is correct? Does anyone know where method #1 comes from (did it used to be the way it was done?) ?
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Old 09-30-2019, 07:15 PM   #2
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I've never seen the #1 method. I always looked at the tables.
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Old 09-30-2019, 07:18 PM   #3
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Quote:
Originally Posted by SecondCor521 View Post
1. Take the previous year's divisor and subtract one. For example, you were 70 last year and used 27.4, so this year you should use 27.4 - 1.0 = 26.4.
This is incorrect.

Quote:
2. Look up the new divisor in the applicable IRS table based on the person's current age. For example, you were 70 last year and used 27.4, so this year you are 71 and should use 26.5.
This is correct.
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Old 09-30-2019, 07:26 PM   #4
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Quote:
Originally Posted by SecondCor521 View Post
....

#2 seems to be the way Vanguard does it, and seems to match the IRS instructions for how to calculate it.

Can anyone confirm that method #2 is correct? Does anyone know where method #1 comes from (did it used to be the way it was done?) ?
The answer, as always, is either "42" or "it depends".

#1 can be correct, for non-spousal inherited IRA's.

https://www.fidelity.com/building-sa...erited-ira-rmd

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As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA in your own name and use your own age and the IRS Single Life Expectancy Table for calculating the first year RMD. For each year after, you would subtract one year from the initial life expectancy factor.
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Old 09-30-2019, 07:28 PM   #5
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Originally Posted by audreyh1 View Post
I've never seen the #1 method. I always looked at the tables.
An inherited IRA from a non-spouse uses method #1. The first year is a table lookup. Subsequent years is previous minus 1.
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Old 09-30-2019, 07:33 PM   #6
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Thanks all for the clarifications!
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Old 09-30-2019, 10:30 PM   #7
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Originally Posted by ERD50 View Post
....#1 can be correct, for non-spousal inherited IRA's.

https://www.fidelity.com/building-sa...erited-ira-rmd



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Old 10-01-2019, 12:14 PM   #8
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Originally Posted by ERD50 View Post
The answer, as always, is either "42" or "it depends".

#1 can be correct, for non-spousal inherited IRA's.

https://www.fidelity.com/building-sa...erited-ira-rmd



-ERD50


The way I read the bolder statement, you are subtracting 1 from the initial divisor for all subsequent years (eg the divisor doesn’t change after the 2 yr). I know that not what is meant, but .....
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