Taking IRA Distributions

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 Appendix C 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:

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 Appendex C to IRS Pub. 590. A portion of the table, for beneficiaries age 35 to 44, is shown below:

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 Appendix C 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.

The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.