Life Expectancy Method

A common (if somewhat morbid) method for figuring out distributions from an IRA.

The math goes like this: take the amount of money in the account and divide by the amount of time you’re expected to live.

You’ve got $1 million in your IRA. You retire at 65. You check the old actuarial tables and see that your remaining life expectancy is 18 years. Using the life expectancy method, you divide that $1 million total by the 18 years you presumably have left. That equation gives you an annual distribution of $55,555.55. A nice round number.