What Determines Your IRA’s Required Minimum Distribution Amount?

The IRS uses life expectancy figures to determine the required minimum distributions (RMDs) of IRA holders age 70½ and older. A life expectancy figure approximates the distribution period—the estimated length of time during which an individual will take withdrawals from the IRA.

For most people, RMDs may be calculated according to one table based on the joint life expectancy of the taxpayer and a hypothetical beneficiary who is ten years younger, even if no beneficiary is named. If the designated beneficiary is a spouse who is more than ten years younger than the owner, a separate, generally more favorable table (joint life and last survivor expectancy) is used. In the event that a person has more than one IRA, the RMD must be calculated separately for each IRA because different multiples (i.e., life expectancies) may apply to each IRA. The sum of the separate RMDs is the total IRA amount that must be withdrawn for the year. However, this amount can be taken out of any one or more IRA accounts.

To calculate the amount of a RMD, divide the IRA balance (as of December 31st of the previous year) by the applicable distribution period. For each subsequent year, the RMD must be recalculated. It is important to note that an account holder may withdraw more than the minimum, but failure to take the required withdrawals results in a 50% tax penalty on the shortfall.


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