Term Certain Method
Definition of 'Term Certain Method'A method of calculating minimum distributions from a retirement account based on the account holder's life expectancy. According to the term certain method, the distribution or withdrawal from the retirement account is based on the holder's life expectancy at the time of the first withdrawal. With each successive year, the account gets steadily depleted as life expectancy reduces by one year. The retirement account would thus be completely depleted once the account holder reaches his or her life expectancy age. |
|
Investopedia explains 'Term Certain Method'Owners of individual retirement accounts (IRA) are required to commence minimum withdrawals from their IRA on or before April 1 in the year after the year in which they reach the age of 70 1/2. The obvious problem with the term certain method is that a healthy retiree may outlive his or her retirement savings if he or she lives well past projected life expectancy. To avoid this problem, alternative methods are to use a joint life expectancy, or to recalculate the holder's life expectancy every year. |
Related Definitions
Articles Of Interest
-
Managing Income During Retirement
Learn some sensible strategies for making your hard-earned savings last for as long as you need them. -
6 Important Retirement Plan RMD Rules
Paying taxes is inevitable - that's why you need to learn about the rules for required minimum distributions. -
Distribution Rules For Inherited Retirement Plan Assets
If you've recently inherited a retirement plan, you must get to know the rules for distributing the funds. -
3 Deadlines For Retirement Plan Beneficiaries
To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines. -
Preparing For Retirement Plan RMD Season
Paying taxes is inevitable - that's why you need to learn about the rules for required minimum distributions. -
Money Tips To Stretch Your Retirement Nest Egg
Learn the key investment and savings tips you need to ensure your retirement savings last as long as you do. -
How To Start Saving For Retirement
If you establish these money-saving habits and patiently allow your wealth to build, you will be taking some huge steps forward in making your financial future more secure. -
Know Your Stock Cost Basis
Understanding equity cost basis is critical for tracking the gains or losses of an investment. -
An Introduction To The Keogh Retirement Plan
Learn more about this popular defined-contribution retirement plan that many business owners, proprietors, and self-employed people can benefit from. -
How To Buy Annuities (And When Not To)
Annuities are complicated products that require some basic homework to be done before requesting quotes. Retirees will want to think about how they envisage their lifestyle and even their potential ...
Free Annual Reports