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 If Bob had withdrawn $25,000.00 at age 50 for vacation purposes, what would have been his penalty?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 Life Expectancy Factor $256,202.89 27.4 = $9,350.47037 Bob's required minimum distribution is $9,350.47. Step 2: Find the penalty for failure to take a distribution. 50% 0.50 Required Minimum Distribution $9,350.47 Step 3: Find the penalty for each withdrawal. 10% Amount of Distribution = $4,675.24 penalty 0.10 $25,000 = $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