Donald Trump vs. Bill Clinton: Same age, but different IRA rules

Both Presidents Donald J. Trump and Bill Clinton turned age 70 in 2016. They were both born in 1946 and are in the first group of baby boomers to be subject to the age 70 ½ required minimum distribution rules, assuming of course they both have IRAs.

Mr. Trump was born on June 14, 1946 and Mr. Clinton on August 19, 1946, just two months apart. But just like their politics, even the IRA RMD rules apply differently for each of them.

TURNING 70 ½

Mr. Trump turned 70 ½ in 2016, but Mr. Clinton turned 70 ½ in 2017, so they each have a different required beginning date (RBD). Mr. Trump’s RBD is April 1, 2017 and Mr. Clinton’s is April 1, 2018. Mr. Trump’s first required distribution year is 2016, while Mr. Clinton’s is 2017.

Even calculating the first RMD will be different for both Mr. Trump and Mr. Clinton. Mr. Trump will calculate his first RMD (for 2016, since he turned age 70 ½ in 2016) using his IRA balance on Dec. 31, 2015, and Mr. Clinton will use Dec. 31, 2016, since his first RMD year is 2017, because he did not turn age 70 ½ until 2017.

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The life expectancies they will each use will be different as well. They will even use different IRS tables to determine their life expectancies for RMDs. Assuming Mr. Trump’s beneficiary is his wife, Melania, he can use the Joint Life Expectancy Table, since Melania is more than 10 years younger than him (assuming she was also the sole beneficiary for the entire year).

Ms. Trump was born on April 26, 1970, so in Mr. Trump’s first RMD year (2016) she was 46 years old and he was 70. Mr. Trump can use the Joint Life Expectancy Table, from IRS Publication 590-B, and look up the joint life expectancy for a 70 and 46-year old. That would give him a factor of 38.6 years. He would divide his Dec. 31, 2015 IRA balance by 38.6 to arrive at his first RMD. The following year he would go back to the Joint Life Expectancy Table and use ages 71 and 47, and so on for each succeeding year.

Mr. Clinton, on the other hand, would use the more traditional table, regardless of who he named as his IRA beneficiary. The Joint Life Expectancy Table exception only applies when a spouse who is more than 10 years younger is the beneficiary. Mr. Clinton would use the Uniform Lifetime Table and look up the factor for age 71, since unlike Mr. Trump, Mr. Clinton turned age 71 in his first distribution year (2017). That factor is 26.5 years, as opposed to the 38.6 years Mr. Trump can use.

Let’s assume they each have $1 million as their IRA balance in their respective calculation years. Mr. Trump’s first RMD will be $25,907 ($1 million / 38.6 years = $25,907). Mr. Clinton’s first RMD will be $37,736 ($1 million / 26.5 years = $37,736).

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Even though they are only two months apart in age, Mr. Trump’s first RMD is $11,829 lower than Mr. Clinton’s, not only because they turned age 70 ½ in different years, but also because Mr. Trump qualified to use the Joint Life Expectancy Table since his spouse beneficiary was more than 10 years younger than him. Mr. Trump saves $11,829 and wins again.

But even if Mr. Trump named someone besides his wife as his IRA beneficiary and had to use the same Uniform Lifetime Table as Mr. Clinton, Mr. Trump would still benefit. That’s because he was age 70 in his first distribution year (2016) so he can use age 70 from the table, while Mr. Clinton must use age 71, since he was 71 in his first distribution year (2017).

IRA CONTRIBUTIONS

Mr. Clinton has an advantage here, but only for 2016. Mr. Clinton can still make a traditional IRA contribution for 2016, up to April 15, 2017, since he did not turn 70 ½ until 2017. Mr. Trump cannot, since he turned age 70 ½ in 2016. Traditional IRA contributions can no longer be made for the year a person turns age 70 ½ or older.

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Ed Slott, a certified public accountant, created the IRA Leadership Program and Ed Slott’s Elite IRA Advisor Group. He can be reached at irahelp.com.