Inherited IRA annual withdrawal Over 10 Years

Iamjohn

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I have 10 years to withdraw $210,000 from an inherited IRA. I would like to know how much I would need to take out each year to completely empty the account assuming an annual growth rate of 10% on the remaining principal each year.

I think the solution to this is related to the safe withdrawal rate calculations that most retirees are using, but I can figure out how to adjust it to answer my question.

Any help would be appreciated, and if anymore information is requested, please let me know.

Thanks!
 
I have 10 years to withdraw $210,000 from an inherited IRA. I would like to know how much I would need to take out each year to completely empty the account assuming an annual growth rate of 10% on the remaining principal each year.

I think the solution to this is related to the safe withdrawal rate calculations that most retirees are using, but I can figure out how to adjust it to answer my question.

Any help would be appreciated, and if anymore information is requested, please let me know.

Thanks!
Please show us what you have tried and exactly where you are stuck.

Please follow the rules of posting in this forum, as enunciated at:


Please share your work/thoughts about this problem.
 
I have 10 years to withdraw $210,000 from an inherited IRA. I would like to know how much I would need to take out each year to completely empty the account assuming an annual growth rate of 10% on the remaining principal each year.

I think the solution to this is related to the safe withdrawal rate calculations that most retirees are using, but I can figure out how to adjust it to answer my question.

Any help would be appreciated, and if anymore information is requested, please let me know.

Thanks!
On the assumption that this is not a homework problem, it is simple. Withdraw $21000 plus any gains, realized or paper, achieved that year. At the end of ten years, the account will be exhausted. It gets a little more complex if you have losses in a year, but not much more complicated.
 
Please show us what you have tried and exactly where you are stuck.

Please follow the rules of posting in this forum, as enunciated at:


Please share your work/thoughts about this problem.

Thanks for the response. I used the savings withdrawal calculator from bankrate like lev888 posted below.

This has effectively answered my question by allowing me to enter different withdrawal amounts until I found one that would completely zero my account over 10 years.

My question now is out of curiosity; How could i calculate the annual withdrawal amount without just guessing until I reached a solution, as I have done with the bankrate calculator.


 
On the assumption that this is not a homework problem, it is simple. Withdraw $21000 plus any gains, realized or paper, achieved that year. At the end of ten years, the account will be exhausted. It gets a little more complex if you have losses in a year, but not much more complicated.

Thanks for the reply, and no this is not homework, it is a real world problem. Withdrawing $21000 plus gains is what I will in practice be doing. I was hoping to find a way to estimate what that final amount would be assuming that the investments in the ira account match an average growth rate of the stock market.

My goal there is to see what amount of pretax deductions I should take so that I don't significantly increase my yearly taxable income.
 
My question now is out of curiosity; How could i calculate the annual withdrawal amount without just guessing until I reached a solution, as I have done with the bankrate calculator.
Scroll to the PAYOUT ANNUITY FORMULA section here:
The formula gives you the initial amount needed for the given number of years, interest rate, etc.
If you solve it for d, you'll have the formula for the withdrawal amount.
 
Thanks for the reply, and no this is not homework, it is a real world problem. Withdrawing $21000 plus gains is what I will in practice be doing. I was hoping to find a way to estimate what that final amount would be assuming that the investments in the ira account match an average growth rate of the stock market. My goal there is to see what amount of pretax deductions I should take so that I don't significantly increase my yearly taxable income.

yes - there are equations that can be fairly simply derived.

Assume that your withdrawal amount is W. Assume that you withdraw that amount on 12/31. Then

on 1 st January of first year your balance: A (=21000)

on 31 st December of first year your balance: A (1 +r) ................................................where r = 0.10

on 1 st January of 2nd year your balance: [A (1+r) - W]​
on 31 st December of 2ndyear your balance: [A (1+r) - W] * (1+r)​
on 1 st January of 3d year your balance: [A (1+r) - W] * (1+r) - W​
on 31 st December of 3d year your balance: {[A (1+r) - W] * (1+r) - W} * (1+r)​

Now continue till as many years as you want and equate that balance to zero (0) and solve for W.

You get that equation for your balance and then we can talk about the solution method to calculate 'W'.

That is why banker's use "programs" .........
 
Assuming 10% in gains each year, which is completely unrealistic, the exact amount is 34,176.53.

Notice that this would be considerably less than what I gave you before on the assumption of 10% gains each year. But as I said, that is an unrealistic assumption. The main reason to consider doing that sort of calculation would be if you expect your tax rate will be lower in future years so you want want to postpone bigger withdrawals until later when your tax rate is lower.
 
Assuming 10% in gains each year, which is completely unrealistic, the exact amount is 34,176.53.

Notice that this would be considerably less than what I gave you before on the assumption of 10% gains each year. But as I said, that is an unrealistic assumption. The main reason to consider doing that sort of calculation would be if you expect your tax rate will be lower in future years so you want want to postpone bigger withdrawals until later when your tax rate is lower.

You're right, 10% is silly; I was just hoping for a neater number example purposes. I do expect a lower tax rate in the future, so this is exactly what I needed. Appreciate the help!
 
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