If you own an IRA account and are over the age of 70 1/2, the Internal Revenue Service (IRS) requires you to take a distribution on an annual basis. Known as a "required minimum distribution" or RMD, this amount changes from year to year based on a number of factors and it can be confusing to determine. The IRS will levy a steep 50 percent penalty tax on any portion of an RMD not withdrawn in a given year, so computing the correct minimum distribution is imperative.
Locate the closing statement for your IRA account from the previous year. Write down the year-end value of the account. If you have more than one IRA account, you can take individual RMDs from each account or aggregate your total account values and withdraw the required amount from as few as one account. As long as the full amount of your RMD is withdrawn, it doesn't matter which account you use.
2
Write down your age on the last day of the previous calendar year. If you are married, write down your spouse's age as well. If your spouse is more than 10 years younger than you are, this will change the calculation of your RMD.
3
Consult Appendix C of IRS Publication 590 (see Resources). Look under your age and that of your spouse, and locate the factor known as the "divisor." This is essentially your life expectancy or the joint life expectancy of you and your spouse. As the chart indicates, the divisor varies depending on your ages.
4
Divide the total value of your IRA account(s) from Step 1 by the divisor in Step 3. The result is the amount of your RMD.
5
Call your financial services firm and verify the amount you have calculated with the firm's internal records. If there are any discrepancies, discuss the matter with your financial adviser.
Tips & Warnings
Don't wait until it's too late in the year to take your minimum distribution. If your firm is slow in processing your distribution request, or unexpected operational problems arise, you'll have to pay the 50 percent penalty tax on any RMD not distributed from your account by year-end.
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