Disclaimer

The calculations and projections provided by this IRA RMD & Tax Calculator are for informational and illustrative purposes only. They are not intended to constitute investment, legal, tax, or accounting advice. Users should consult qualified professionals before making any financial decisions based on the results.

Calculations and Assumptions

Beginning IRA Balance:

The starting balance entered by the user is assumed to be accurate and is the initial amount used for all subsequent calculations.

Current Calendar Year and Age:

The calculator uses the current calendar year and the user's current age to project values annually up to the specified life expectancy.

Life Expectancy:

Projections extend to the age specified as the life expectancy. The calculator assumes the user lives to this exact age without accounting for mortality variability.

Rate of Return:

A constant annual rate of return (specified by the user) is applied to the IRA balance each year.
The rate is nominal and does not account for inflation, market volatility, or changes in investment performance over time.

Required Minimum Distributions (RMDs):

RMDs commence at age 72, in accordance with IRS regulations as of the current tax law.
The RMD divisors are based on the IRS Uniform Lifetime Table and may change with future tax law revisions.
The RMD amount is calculated by dividing the IRA balance at the beginning of each year by the applicable RMD divisor for that age.

Custom Annual Withdrawals:

Users can specify a custom annual withdrawal amount and the age at which to start these withdrawals.
Custom withdrawals begin at the specified "Age to Start Custom Withdrawals" and continue annually thereafter.

At age 72 and older:
If the custom withdrawal amount is less than the RMD, only the RMD is withdrawn.
If the custom withdrawal amount is greater than the RMD, the total withdrawal equals the custom amount, which includes the RMD.

Early Withdrawal Penalties:

A 10% early withdrawal penalty is applied to custom withdrawals taken before age 59½.
The penalty is calculated only on the taxable portion of early withdrawals.
RMDs are not subject to early withdrawal penalties, even if taken before age 59½ (though RMDs typically start at age 72).

Tax Calculations:

Taxes on withdrawals are calculated using the IRA owner's tax rate specified by the user.
The same tax rate is applied consistently throughout the projection period.
The calculator does not consider state taxes, local taxes, or potential changes in tax laws.
Taxes on heirs are calculated based on the remaining IRA balance at the user's life expectancy, using the heir's tax rate provided.

Heir's Tax Implications:

It is assumed that the remaining IRA balance is fully distributed to heirs in the year of the user's life expectancy.
The heir's tax is calculated on this lump-sum distribution, using the heir's tax rate specified.

Assumed Growth of Invested RMDs:

Net RMD amounts (after taxes) are assumed to be reinvested and grow annually at the same rate of return specified for the IRA.
The calculator does not account for taxes on gains from these reinvestments.

Ending IRA Balance:

The ending IRA balance each year is calculated by:
Adding the assumed growth to the starting balance.
Subtracting total withdrawals (RMDs and custom withdrawals).

Inflation:

The calculator does not adjust for inflation. All amounts are in nominal dollars.

Regulatory Changes:

Current tax laws and IRS regulations are assumed to remain constant throughout the projection period.
Potential future changes to tax rates, RMD rules, or other relevant laws are not accounted for.

No Additional Contributions:

The calculator assumes no additional contributions are made to the IRA after the initial balance.
Withdrawal Timing:

Withdrawals are assumed to occur at the end of each year for calculation purposes.

Early Depletion of IRA Balance:

If withdrawals and taxes deplete the IRA balance before reaching the specified life expectancy, the calculator will not project negative balances but will show the balance as zero thereafter.

No Consideration of Other Income Sources:

The calculator does not factor in other income sources, retirement accounts, Social Security benefits, or required minimum distributions from other IRAs.
Important Considerations

Hypothetical Projections:

The results are hypothetical and are intended to illustrate potential scenarios based on the inputs and assumptions. They are not guarantees of future performance or outcomes.

Tax Law Complexity:

Tax laws are complex and subject to change. This calculator simplifies tax calculations and may not capture all nuances of tax regulations.

Individual Circumstances:

The calculator does not account for individual circumstances such as marital status, filing status, deductions, exemptions, or other factors that can significantly impact tax liability.

Market Risks:

Investments are subject to market risks, including the potential loss of principal. The assumed rate of return is not guaranteed.

Professional Advice Recommended:

Users should consult with qualified financial advisors, tax professionals, or legal counsel to understand how the results apply to their specific situations.

Liability Disclaimer
The developers and providers of this calculator make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability of the calculator or the information contained within it. Any reliance you place on such information is strictly at your own risk.

In no event will the developers, providers, or any affiliated parties be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, arising from or in connection with the use of this calculator.

By using this calculator, you acknowledge that you understand and agree to this disclaimer and the assumptions underlying the calculations.