Orange County California

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Orange County Estate Planning Attorney Discusses Remainder of Life Expectancy for IRA Benefits

There are Three Options For IRA Distribution, The Third Option Is Remainder Of Life Expectancy

The third option and clearly the best option for anybody that’s receiving a large sum of money through an IRA.This option is to stretch that IRA out over the remainder of life expectancy.

For example, let’s assume that a beneficiary receives a $100,000 and they are 40 years of age at the time they received it. If they take a lump sum, they have to report the taxes on the $100,000. If they take it out over a 5-year time period, they have to report the taxes at roughly $20,000 per year. However, if they take the third option stretching it out for the remainder of life expectancy, it turns out that they have approximately 43 remainder life expectancy according to the IRS, and so they have to take out 143rd in the first year but the remaining 42/43 is growing tax-deferred.

It’s hard to believe these numbers, but here’s how it works to take remainder of life expectancy option.

We know if they take it out in a lump sum they’re paying close to 30% to 40% in taxes. If they take it out over the remainder life expectancy and if the money was invested, so it was doing as well as the S&P 500 has traditionally done, the $100,000 they received at age 40 it generates approximately $1,000,000 lifetime benefit. It makes a huge difference in the wealth lump sum versus over the lifetime, however, you don’t get to choose lump sum or Lifetime; the beneficiary is the one to choose, unless you designate the trust as a beneficiary. Contact us today and set up an appointment.

We offer a many different resources and pamphlets on the subject of creating, updating and implementing estate plans. We also offer a regularly scheduled seminar in our office to help people determine what the best options are for them in their estate planning needs. We hope you sign up for one of our seminars to help you find your best options. We regularly conduct free seminars designed to teach about the benefits of creating an estate plan


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