Using an "Inherited RMD Calculator" to "ballpark" IRA withdrawal rate

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From this linked study:
longevity.stanford.edu/wp-content/uploads/2018/03/How-to-Pensionize-Your-401k.pdf

I got to thinking... "how can a 59.5 year old start taking RMDs 11 years early?" Most RMD calculators are designed to handle age 70.5 as a starting age. Using an "Inherited RMD" calculator, an "EarlyRMD" calculation can be closely approximated for any starting age between (59.5 -70.5).

The study highlights the value that the RMD calculations provides by "pensionizing" your IRA. RMD start at age 70.5. This yearly required withdrawal can be considered a "pension or annuity like" income stream for the retiree.

Here are some of the studies findings:

The Spend Safely in Retirement Strategy (RMDs)
Our analyses show that the Spend Safely in Retirement Strategy has many key advantages, as follows:
• It produces more average total retirement income expected throughout retirement compared to most solutions we analyzed.
• It automatically adjusts the RMD withdrawal amounts to recognize investment gains or losses. Withdrawals are increased after years with favorable returns, and vice versa.
• It provides a lifetime income, no matter how long the participant lives, and it automatically adjusts the RMD withdrawal each year for remaining life expectancy.
• It projects total income that increases moderately in real terms, while many other solutions aren’t projected to keep up with inflation. The Spend Safely in Retirement Strategy produced projected real increases in income of up to 10% over the retirement period.
• It produces a moderate, compromise level of accessible wealth for flexibility and the ability to make future changes. It produces higher accessible wealth compared to strategies that use annuities. It provides less accessible wealth than strategies that maximize flexibility, such as SWPs with low withdrawal rates and/or strategies that don’t use savings to enable the delay of Social Security benefits.
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It provides a moderate, compromise level of bequests, for the same reasons listed above.
• It produces low measures of downside volatility, with potential future annual reductions in spending typically well under 3%, which is hopefully a manageable amount.
• It gives older workers the flexibility to transition from full-time work to part-time to full retirement.

Finally, the Spend Safely in Retirement Strategy has another significant advantage: It can be readily implemented from virtually any IRA or 401(k) plan without purchasing an annuity. Many administrators can calculate the RMD and automatically pay it according to the frequency elected by the retiree.

My take:

If one would like to start this strategy earlier than 70.5 it can be possible to get this EarlyRMD calculation by using an Inherited IRA calculator. This Inherited IRA (RMD) calculator could be used at the end of each year, starting with (December 31st, age 59) for your 59.5 year distribution. This EarlyRMD calculator would provide the 59.5 year old with an Early Spend Safe in Retirement Strategy. One could then switch to the NormalRMD calculator starting December 31st, age 70 for your 70.5 year distribution.

Since this EarlyRMD calculator is actually an inherited IRA RMD calculator you would enter "yes" as the surviving spouse so your RMDs are spread out over your life expectancy. The calculator lets you enter your projected total IRA balance, your projected annual yield (I used 4% to start) and your age. Then click "recalculate" and scroll down to see your results. Very simple way of getting an idea of how your IRA can provide an income stream throughout retirement starting at age 59.5.

http://www.hughcalc.org/mrd.cgi

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Remember that this calculator is using an accelerated withdrawal (i.e. shorter lifetime) calculation. That's because the calculations are based on a single lifetime (Table 1), rather than the usual uniform lifetime (Table 3) figures.

So when you get to age 70, using the EarlyRMD calculator, you're dividing by 17.0, but the "real" divisor (for your own IRA) that you switch over to, is 27.4. That is, you'll be taking out around 50% too much as you get closer to age 70.

There's nothing sacrosanct about the IRS tables. As the study notes, they're designed for tax purposes. "[The RMD] wasn’t devised as a spend-down strategy, although our analyses show that it happens to meet common retirement planning goals."

IRS tables just happen to work okay as crude planning tools. You could consider using an actuarial table of life expectancies rather than a tax table.