Required Minimum Distributions
Required Minimum Distributions ensure that tax-deferred retirement accounts are eventually taxed. Sterling uses IRS life expectancy tables to calculate the minimum amount clients must withdraw each year.
RMD Starting Age
The starting age for RMDs depends on birth year. Clients born in 1951-1959 must begin at age 73. Those born in 1960 or later must begin at age 75. Sterling tracks these rules and alerts advisors when clients approach RMD age.
First Year Flexibility
Clients can delay their first RMD until April 1 of the year following the year they reach RMD age. However, this results in two distributions in that calendar year.
Uniform Life Expectancy Table
Most clients use the Uniform Lifetime Table to calculate RMDs. This table provides a distribution period based on the account owner's age at year end. Divide the December 31 account balance by the distribution period to calculate the RMD.
Joint Life Expectancy Table
Clients with a spouse more than 10 years younger who is the sole beneficiary may use the Joint Life Expectancy Table. This results in smaller required distributions because the combined life expectancy is longer.
When to Use the Joint Table
The Joint Life Table only applies when the spouse is both the sole beneficiary and more than 10 years younger. Sterling automatically identifies which table applies based on household facts.
RMD Calculations
- Determine the account balance as of December 31 of the prior year
- Find the distribution period from the applicable life expectancy table
- Divide the balance by the distribution period
- The result is the minimum required distribution for the year
Sterling calculates RMDs automatically when generating retirement distribution advice. The reference tables are available here for verification or client education purposes.