Figuring IRA Withdrawals When Your Beneficiary Dies, and Essential IRA Records

This week, Gail tackles some of your questions about IRAs.

Dear Gail-
I’m 78 years old and have been taking mandatory withdrawals from my IRA since I was 70½ , as required by law. Because my wife was 12 years younger, I was told to use our “joint’ life expectancy.

Here’s my question: My wife died earlier this year. How is this going to affect my withdrawal amount for 2006?

I’ve just started seeing a wonderful woman who is closer to my age- she’s 72. If we tie the knot, would I again use our “joint” life expectancy?


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Dear Bruce-
I’m very sorry for the loss of your wife. I’m sure it’s devastating to lose someone who has been such an important part of your life.

The rules governing “required minimum distributions” — IRS-speak for withdrawals you must start once you reach age 70½ — can be confusing.*

However, the calculation itself is straightforward: Each year you simply divide the value of your IRA at the end of the previous year by your “life expectancy factor.” Here’s how you would calculate your RMD for 2006:

December 31, 2005 IRA Value / Life Expectancy Factor = RMD

You will find the December 31 value of your IRA on the annual statement you receive from your custodian. The “life expectancy factor” is a little trickier. It depends upon who your beneficiary is.

There are three different “life expectancy factor” tables: “Uniform Lifetime,” Joint Life,” and “Single Life.” The hard part is knowing which one to use.

In most cases, you will use the “Uniform” table. The “Single” life expectancy table is used by someone who inherits someone else’s IRA. All of these tables can be found in IRS Publication 590 which can be accessed online at:

Here's a breakdown to help you know which table you use:

If your beneficiary is:

Your Spouse and s/he is not more than 10 years younger: Uniform
Your Spouse, regardless of his/her age, plus anyone else: Uniform
Non-spouse- an individual or organization (such as a charity): Uniform
No beneficiary named: Uniform
Your spouse and s/he is more than 10 years younger: Joint

Since your wife was alive for part of this year, you will still use the “Joint” table to determine your life expectancy factor. Next year, you must switch to the “Uniform” table. Using the “Uniform” table will give you a shorter life expectancy and, thus, result in a larger minimum withdrawal.

Ed Slott, author of “Parlay Your IRA into a Family Fortune,” says if you re-marry, your spouse’s age will not factor into which life expectancy table you use until the year after you “tie the knot.” Assuming you marry the woman you are currently dating, you would continue to use the “Uniform” table because she is only 6 years younger than you.

Important! Since your primary beneficiary (your wife) has pre-deceased you, it is critically important that you contact your financial advisor or IRA custodian in order to name a new beneficiary. You should also make sure that you have named “contingent” beneficiaries. This will prevent your IRA from being left to your “estate” when you die. Your estate is usually the worst beneficiary because your IRA will have to go through probate so the court can decide who inherits it.

Hope this helps,

*Technically, you have until April 1st of the year after you turn 70½ to take your first withdrawal. The deadline for each subsequent withdrawal is December 31st.

This year I contributed to a Roth IRA instead of making a tax-deductible contribution to a regular IRA. I also converted a portion of my regular IRA to a Roth. (I know I’ll have to pay the taxes on this when I file my 2006 return.)

How do I keep all of this straight?


Dear Allen,
First of all, since the onus is on you in the event of an IRA audit, you’re smart to plan ahead in terms of record keeping. However, the forms you should receive from your IRA custodian and tax preparer are all you need. In all cases, copies are sent to both the IRA owner as well as the Internal Revenue Service. Save all of these:

IRS Form 1099-R
This states that you took a distribution from a retirement account. It lists the amount and comes from your IRA custodian.

IRS Form 5498
Here is where your IRA custodian lists the amount of any IRA contributions. This includes traditional IRAs as well as Roth IRAs. It’s also used to report contributions to SEPs and SIMPLEs — employer-sponsored retirement plans that use IRA accounts. This form also comes from your IRA custodian.

IRS Form 8606
If you have made non-deductible (after-tax) contributions to a traditional IRA, these contributions are not taxed again when you make withdrawals. However, you’ve got to prove this is the case if you’re audited. Your tax preparer completes and provides this form.

In the language of taxation, amounts that you’ve already paid income tax on are called “basis” in your IRA. If my traditional IRA is worth $80,000 and $20,000 of that consists of after-tax contributions, my “basis” is $20,000, or 25 percent.

Mark Luscombe is the Senior Tax Analyst at CCH, a major provider of tax information and software. According to Luscombe, “If any IRAs include non-deductible contributions, the 8606 would come into play to determine what portion of your basis is allocable to the distribution.”

Translation: In the above example, since my “basis” is 25 percent of the value of my traditional IRA, when I take a withdrawal (for instance, to convert it to a Roth) I will not have to pay income tax on 25 percent of this amount.

You will not receive Form 8606 if you haven’t made any after-tax (non-deductible) contributions to your regular IRA.

According to Luscombe, since you made a Roth IRA conversion this year, “all three forms could get involved.” Form 1099-R would state how much you withdrew from your regular IRA, i.e. the amount you converted. Form 5498 would report the amount you contributed to a Roth IRA — both through your annual contribution as well as the conversion amount.

In addition, if you made any after-tax (non-deductible) contributions to your traditional IRA in previous years, you need to dig up all copies of Form 8606 you received (and hopefully saved) to determine what percentage of the converted amount is subject to income tax.

You can see what each of these forms looks like by visiting the IRS website, Click on “Forms and Publications” and then enter the name of the form into the search box.

There’s a chance the forms you receive from your IRA custodian are in a different format. That’s fine. All you need is verification of the money trail: Amounts contributed, amounts withdrawn, and where they ended up.

If you can’t locate these forms, contact your tax preparer and IRA custodian. One thing I know for sure: It will be easier to locate this paperwork today than 10 or 20 years from now!

Take care,

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