New Distribution Rules Outlined

The IRS recently delivered some good news for many people who are taking required distributions from retirement savings plans and IRAs. These changes will be especially welcome to people who would like to take as little money as possible from their retirement savings accounts, either because they are concerned about outliving the available money or because they wish to delay taxation for as long as possible. The changes also make it easier to pass more money from retirement plans to children or grandchildren.

Highlights of the new regulations include:

• Simpler calculations, using a new uniform table. Most participants will be able to easily calculate their own required distributions
  
• Significant reduction in the amount of required distributions for most people. The new table essentially extends life expectancy, so that distributions may be made over a longer period of time.
  
• New "beneficiary friendly" rules make it easier to accommodate multiple beneficiaries and the individual distribution choices of separate beneficiaries. Distribution rules were liberalized to generally allow all beneficiaries to take payments over their lifetimes.

IRA owners and participants in some retirement savings plans may use the new rules in 2002. For other retirement savings plans, the new rules will generally be effective as of January 1, 2003. The IRS has designed a method that will allow participants to take advantage of the new rules by taking the larger required distributions in 2001, and be allowed to roll over part of the distribution into an IRA.