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Understanding IRA and QRP Distribution Rules

In April 2002, the IRS finalized its rules regarding required minimum distributions (RMDs). These regulations set forth standards requiring an actuarially determined minimum amount be paid out of a QRP or IRA. A QRP is a qualified retirement plan for self-employed persons and is sometimes called a "Keogh plan". In other words, these accounts actually have to be used to fund retirement, and not just as a means of accumulating great wealth to pass on to future generations. RMDs must begin being made no later than the year following the year in which the account owner turns 70.5.

Determining the required minimum distributions is relatively simple. The account balance is divided by the actuarially determined "distribution period." The distribution period is determined by consulting one of two tables published by the IRS. The primary table, labeled the "Uniform Lifetime Table" is used in most cases. To view this table, click here. It is used anytime the beneficiary named is not the account owner's spouse, or if the beneficiary is the spouse and the spouse is no more than 10 years younger than the employee. The other table, known as the "Joint and Last Survivor Table," is only used if the spouse is more than 10 years younger than the account owner.


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