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Example Bob Bains had saved 2 000 00 per year in his IRA for 35 years At age 70 the fair market value of his IRA was 256 202 89 Using the Uniform Life Table on p 47 what is his required minimum distribution What penalty would he pay if he did not take the distribution If Bob had withdrawn 25 000 00 at age 50 for vacation purposes what would have been his penalty What if he had used the 25 000 00 for his children s college expenses Step 1 Find the required minimum distribution Fair Market Value 9 350 47037 Life Expectancy Factor Bob s required minimum distribution is 9 350 47 Step 2 Find the penalty for failure to take a distribution 50 Required Minimum 0 50 256 202 89 27 4 0 10 Distribution 9 350 47 Step 3 Find the penalty for each withdrawal 10 Amount of Distribution 25 000 4 675 24 penalty 2 500 Step 4 Determine the penalty for making an early withdrawal for his children s college expenses No penalty for making an early withdrawal for his children s college expenses Concept Check Complete the problems 1 May Kawasaki is 72 and has an IRA with a fair market value of 98 000 a Use the Uniform Life Table on p 47 to determine her required minimum distribution b What penalty would she incur if she failed to take the distribution c What penalty would she have paid if she had made an early withdrawal of 10 000 to take a vacation 2 Amir Bahoud is 70 and has a Roth IRA with a fair market value of 156 800 a Use the Uniform Life Table p 46 to determine her required minimum distribution b What penalty would he incur if he failed to take t distribution c What penalty would he have paid if he had made an early withdrawal of 20 000 to help pa his grandchildren s college education Personal Finance B Pa

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