Life Expectancy Method

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Dictionary Says

Definition of 'Life Expectancy Method'

A method of calculating annuity payments, by dividing the balance or total value of a retirement account by the policy holder's anticipated length of life. This is the easiest method of early distribution to calculate.

There are two types of life expectancy methods. One is the "certain method", and the other the "recalculation method". IRS tables help determine life expectancy of the owner or the joint life expectancies of the owner and a beneficiary.
Investopedia Says

Investopedia explains 'Life Expectancy Method'

An example of how this method is calculated:

If a 54-year-old single man wants distributions to begin in 2011, he must first calculate the total account value as of December 31, 2010 and his life expectancy according to IRS Publication 590 Appendix C. If the account value were $100,000 and his life expectancy is 30.5 years, the amount he can receive in distributions each year is $3,278.69. The following year, the now 55-year-old would again take the account balance on December 31 and divide the amount by 29.6 - his new life expectancy. Essentially, the older the person becomes, the shorter the life expectancy becomes, although this relationship is not linear.

Search results for

'Life Expectancy Method'

  • 3 Deadlines For Retirement Plan Beneficiaries

    http://www.investopedia.com/articles/retirement/03/120303.asp
    ... If the life expectancy method applies and the beneficiary fails to distribute an
    RMD amount by December 31 during the first four years, the penalty will be ...

  • How do my siblings and I receive inherited pension benefit ...

    http://www.investopedia.com/ask/answers/05/inheritedpension.asp
    ... But this will only apply if the beneficiary did not begin distributions using the
    life-expectancy method by December 31 of the year following the year your ...

  • Upon my death, will the beneficiaries of my IRA be compelled to ...

    http://www.investopedia.com/ask/answers/05/beneficiarytax.asp
    ... Beneficiaries for information on beneficiary options and calculating the minimum
    amounts that should be withdrawn each year under the life expectancy method. ...

  • Substantially Equal Periodic Payment (SEPP): Learn The Rules

    http://www.investopedia.com/articles/retirement/02/112602.asp
    ... He has no beneficiary for his IRA, so he will use only his life expectancy. The
    results are as follows: Amortization method: $25,511.57 per year. ...

  • Selecting The Payout On Your Annuity

    http://www.investopedia.com/articles/retirement/05/071105.asp
    ... Systematic Withdrawal Schedule Under this method, you can select the amount of payment
    that you wish to ... The burden of life-expectancy risk is on your shoulders ...

  • 3 Steps To Take If You Miss Your RMD Deadline

    http://www.investopedia.com/articles/retirement/05/011005.asp
    ... If John wants to continue using the life-expectancy method, he will have to
    pay the IRS an excise tax of $5,000 and must file Form 5329. ...

  • Designating A Trust As Retirement Beneficiary

    http://www.investopedia.com/articles/retirement/04/081804.asp
    ... owner dies before the required beginning date (RBD), the beneficiary is not eligible
    to use the life-expectancy method to calculate post-death distributions. ...

  • What are the "certain requirements" that must be met for ...

    http://www.investopedia.com/ask/answers/03/072803.asp
    ... annuitization, or life-expectancy method. Each method gives a different
    result, and the life expectancy method gives the lowest. ...

  • 3 Retirement Plan Moves To Make Before Year-End

    http://www.investopedia.com/articles/retirement/03/121703.asp
    ... If you are a beneficiary who is required to distribute retirement assets using the
    life-expectancy method, you may need to distribute a minimum by December 31. ...

  • What is the "stretch IRA" concept?

    http://www.investopedia.com/ask/answers/09/stretch-ira.asp
    ... even a new investment concept, it is simply a wealth transfer method that allows ...
    distributions from your IRA at age 70.5 based on an IRS life expectancy table. ...

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