The IRS requires that you begin to take money from a regular IRA by April 1 of the year after you reach age 70-1/2. These mandatory withdrawals are called distributions.
The date on which you
must take your first distribution is called your required beginning date. From
this point on, the IRS requires you to take a minimum distribution (RMDs) at
least once a year. (RMDs are also called MRDs.)
Except for the first
year of an RMD (when you have until the following April 1), you must take yearly
distributions by Dec. 31. This means you may have two distributions in the
calendar year of your required beginning date. Roth IRAs do not have RMDs.
If you do not take
the full amount of a required minimum distribution, you may owe a 50% tax on the
difference. For example, if your RMD is calculated as $15,000 and you only take
$10,000, you may be liable for $2,500 in taxes on the difference. Taking a
smaller-than-required distribution is called excess accumulation.
Amounts for required
minimum distributions are based on your IRA Account Balance and
life expectancy. To
calculate your RMD, divide your year-end IRA account balance (adjusted for
certain contributions and distributions) by the applicable divisor in the
appropriate table, found in the supplement to IRS Pub. 590.)
The following table
shows divisors for ages 70 through 79 for the Uniform Table, which would be used
by most owners:
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For example, if you are
age 72 and have an ending balance in your IRA of $244,000, your required minimum
distribution for the year is $9,531.
If you are a beneficiary
of an IRA, you calculate your required minimum distribution using Table I: Life
Expectancy Tables, found in the supplement to IRS Pub. 590. A portion of the
table, for beneficiaries age 35 to 44, is shown below:
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Table I
shows the life expectancy for all possible ages.
For
persons who are married with a spouse who is more than 10 years younger, Table
II: Joint Life and Last Survivor Expectancy is used to calculate the period over
which you divide your IRA balance. For example, the distribution period that
intersects your current age of 75 and your spouse's current age of 62 is 25.0.
If your ending IRA balance is $238,000, your required distribution is $9,520.
Table II is also found in the supplement to IRS Pub. 590.
Now
that you're taking distributions from a regular IRA, you will owe income taxes
in the year that you receive the distribution. If the entire amount of the
distribution is attributed to a tax-deductible contribution, you owe taxes on
both the contribution and earnings portion of the distribution.
If the
distribution is attributed to a nondeductible contribution, you don't owe taxes
on the amount that is attributed to a nondeductible contribution. This is
because the nondeductible portion was an after-tax contribution to the account.
