CRPC Required Minimum Distributions and Beneficiary Planning 1 — Questions and Answers
Question 1: Under SECURE 2.0, what is the required minimum distribution starting age for an individual born in 1955?
- Age 70½
- Age 72
- Age 73 (Correct answer)
- Age 75
Correct answer: Age 73
Under SECURE 2.0, individuals born between 1951 and 1959 must begin RMDs at age 73, while those born in 1960 or later must begin at age 75.
Question 2: What is the excise tax penalty for failing to take a required minimum distribution under SECURE 2.0?
- 10% of the shortfall
- 25% of the shortfall, reducible to 10% if corrected timely (Correct answer)
- 50% of the shortfall
- 35% of the shortfall
Correct answer: 25% of the shortfall, reducible to 10% if corrected timely
SECURE 2.0 reduced the RMD penalty from 50% to 25% of the shortfall, further reducible to 10% if corrected within the IRS correction window.
Question 3: How is a traditional IRA's required minimum distribution calculated each year?
- Prior year-end balance divided by the applicable life expectancy factor (Correct answer)
- Current balance multiplied by a fixed age-based percentage
- Current balance divided by the account holder's actual remaining life expectancy
- 4% of the prior year-end balance
Correct answer: Prior year-end balance divided by the applicable life expectancy factor
RMDs are calculated by dividing the account's December 31 prior-year balance by the applicable IRS life expectancy factor from the relevant table.
Question 4: Which retirement account type is NOT subject to required minimum distributions during the original owner's lifetime?
- Traditional IRA
- Roth IRA (Correct answer)
- SEP IRA
- SIMPLE IRA
Correct answer: Roth IRA
Roth IRAs are not subject to RMDs during the original owner's lifetime, making them a powerful tool for legacy planning and tax-free wealth transfer.
Question 5: Which IRS life expectancy table do most IRA owners use when calculating their RMDs?
- Single Life Expectancy Table
- Joint Life and Last Survivor Expectancy Table
- Uniform Lifetime Table (Correct answer)
- Applicable Distribution Period Table
Correct answer: Uniform Lifetime Table
The Uniform Lifetime Table is used by most IRA owners for RMD calculations, regardless of whether a beneficiary has been named, unless the sole beneficiary is a spouse more than 10 years younger.
Question 6: An IRA owner's sole beneficiary is a spouse who is 15 years younger. Which IRS life expectancy table should be used to calculate the owner's RMDs?
- Uniform Lifetime Table
- Single Life Expectancy Table
- Joint Life and Last Survivor Expectancy Table (Correct answer)
- Beneficiary Life Expectancy Table
Correct answer: Joint Life and Last Survivor Expectancy Table
When the sole beneficiary is a spouse more than 10 years younger, the Joint Life and Last Survivor Expectancy Table may be used, producing a longer factor and lower annual RMDs.
Question 7: Starting in 2024 under SECURE 2.0, which retirement account type was newly exempted from RMDs during the owner's lifetime?
- Traditional 401(k) plans
- Roth 401(k) plans (Correct answer)
- SIMPLE 401(k) plans
- Safe harbor 401(k) plans
Correct answer: Roth 401(k) plans
SECURE 2.0 eliminated RMDs for Roth accounts in employer-sponsored plans (Roth 401(k)s) beginning in 2024, aligning them with Roth IRA treatment for the owner's lifetime.
CRPC Required Minimum Distributions and Beneficiary Planning 1
Under SECURE 2.0, what is the required minimum distribution starting age for an individual born in 1955?