ITEM SET 10: REQUIRED MINIMUM DISTRIBUTIONS (RMDS) Mary and Larry have been married for 40 years and have three children together. They: semi-retired and enjoying life at the beach in Florida. Mary turned 70 on February 14th Year 2 and Larry turned 70 on October 15th Year 2. Mary is fully retired as a lingerie model from Burl's Boutique, which marketed to older customers. Larry still works part-time for a company that rents sailboats and provides sailing guides for customers renting boats. The company, called Set Sail, sponsors a 401(k) plan, in which Larry continues to make contributions. Larry gave up his corporate job at IBM several years ago and currently are a plans to continue working at Set Sail because he loves it. Larry's rich uncle Juan died earlier during Year 2 and left his Roth IRA to Larry. Larry is sad about Juan, but happy about the IRA and even happier that it is a Roth IRA. Juan started the Roth IRA over ten years ago. They need to know whether they need to take minimum distributions and if so, how much and from what accounts. The balances in the accounts are shown below. December 31 December 31 pecember 31 Year 3 Balance Year 2 Plan Account/Plan Type Plan # Year 1 Balance Balance Owner $22,000 $58,000 $45,000 $23,500 $20,500 $68,000 $50,300 $260,000 $220,000 $20,000 $49,000 $700,000 $92,000 Self Directed IRA Mary Mary Mary Mary 1 $67,000 Self Directed Roth IRA 2 $51,300 Self Directed IRA 3 $267,000 $200,000 $18,000 $270,000 $180,000 $17,000 $40,000 $600,000 Burl's MPPP 4 Inherited Roth IRA Larry Larry Larry Larry Larry Self Directed IRA 6 IBM 401(k) Roth Account IBM MPPP $41,500 7 $650,000 $89,000 Set Sail 401(k) Roth Account $80,000 What is the required beginning date (RBD) for Mary and Larry? 1. Answer: 15 What is the factor for Mary and for Larry's first required minimum distribution (RMD)? Answer 3. Which plans must they take a distribution from during Year 3 (without regard to the ability to delay a distribution)? Answer: What is the total amount of Larry's RMD for Year 3? Answer: 5. What is the minimum number of RMDS Mary has to take each year? Answer: 15 6 If Mary delays her first RMD to April 1st of Year 3, how much is the total amount of her RMDS for next year? Answer: How is the life expectancy factor for the inherited Roth IRA determined for the second year compared to the life expectancy factor for Larry's other accounts? 7. Answer: Assume that Mary falls off the sailboat and is eaten by a great white shark. Also assume that she named her three children, ages 50, 48, and 45, as equal beneficiaries on her self-directed Roth IRA. 8 What are the implications for the beneficiaries regarding minimum distributions? Answer ITEM SET 10: REQUIRED MINIMUM DISTRIBUTIONS (RMDS) Mary and Larry have been married for 40 years and have three children together. They: semi-retired and enjoying life at the beach in Florida. Mary turned 70 on February 14th Year 2 and Larry turned 70 on October 15th Year 2. Mary is fully retired as a lingerie model from Burl's Boutique, which marketed to older customers. Larry still works part-time for a company that rents sailboats and provides sailing guides for customers renting boats. The company, called Set Sail, sponsors a 401(k) plan, in which Larry continues to make contributions. Larry gave up his corporate job at IBM several years ago and currently are a plans to continue working at Set Sail because he loves it. Larry's rich uncle Juan died earlier during Year 2 and left his Roth IRA to Larry. Larry is sad about Juan, but happy about the IRA and even happier that it is a Roth IRA. Juan started the Roth IRA over ten years ago. They need to know whether they need to take minimum distributions and if so, how much and from what accounts. The balances in the accounts are shown below. December 31 December 31 pecember 31 Year 3 Balance Year 2 Plan Account/Plan Type Plan # Year 1 Balance Balance Owner $22,000 $58,000 $45,000 $23,500 $20,500 $68,000 $50,300 $260,000 $220,000 $20,000 $49,000 $700,000 $92,000 Self Directed IRA Mary Mary Mary Mary 1 $67,000 Self Directed Roth IRA 2 $51,300 Self Directed IRA 3 $267,000 $200,000 $18,000 $270,000 $180,000 $17,000 $40,000 $600,000 Burl's MPPP 4 Inherited Roth IRA Larry Larry Larry Larry Larry Self Directed IRA 6 IBM 401(k) Roth Account IBM MPPP $41,500 7 $650,000 $89,000 Set Sail 401(k) Roth Account $80,000 What is the required beginning date (RBD) for Mary and Larry? 1. Answer: 15 What is the factor for Mary and for Larry's first required minimum distribution (RMD)? Answer 3. Which plans must they take a distribution from during Year 3 (without regard to the ability to delay a distribution)? Answer: What is the total amount of Larry's RMD for Year 3? Answer: 5. What is the minimum number of RMDS Mary has to take each year? Answer: 15 6 If Mary delays her first RMD to April 1st of Year 3, how much is the total amount of her RMDS for next year? Answer: How is the life expectancy factor for the inherited Roth IRA determined for the second year compared to the life expectancy factor for Larry's other accounts? 7. Answer: Assume that Mary falls off the sailboat and is eaten by a great white shark. Also assume that she named her three children, ages 50, 48, and 45, as equal beneficiaries on her self-directed Roth IRA. 8 What are the implications for the beneficiaries regarding minimum distributions