IRA and being 70 1/2

Michael Lodge

by Michael Lodge

So there come that time when you want to withdraw from your IRA and you have reached the age of 70 1/2.  What can you withdraw and the taxable issues that come along with it.

Question: I am over age 70½. How do I determine the amount I must withdraw each year from my IRA & 401(k) accounts to avoid a penalty?

Answer:

Generally, the required minimum distribution (RMD) must be figured separately for each account. You can calculate the RMD for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes in Tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). Use:

  • The Uniform Lifetime Table (Table III) if you are an unmarried owner, an owner whose spouse is not the sole beneficiary, or an owner whose spouse is not more than 10 years younger;
  • The Joint and Last Survivor Table (Table II) if you are a married owner whose spouse is both more than 10 years younger and the sole beneficiary of the account; and
  • The Single Life Expectancy Table (Table I) if you are a beneficiary of an account.

You can use Worksheet 1-1. Figuring the Taxable Part of Your IRA Distribution, in Publication 590-B.

Note: If you have more than one such IRA or retirement plan account from which RMDs must be taken, you can total the required distributions for all the accounts and then satisfy the requirement by taking distributions from any one (or more) of the accounts.

Nothing is ever simple with the IRS.  Getting your funds is a complicated calculation.  You work hard for the money and the IRS makes it harder to get to it.

If you have questions on this topic or other please send an email to:  tax@icontaxgroup.com