How to Calculate the RMD for an IRA

If you own an IRA account and are over the age of 70-1/2, the government requires you to take a distribution on an annual basis. Known as a "required minimum distribution," or RMD, this amount changes every year based on a number of factors and can be confusing to determine. Additionally, the government imposes a steep 50 percent penalty tax on any amounts not withdrawn in a given year, so computing the correct RMD is imperative. Here are some steps to help calculate the RMD for an IRA.

Difficulty: Moderate

Instructions

Things You'll Need:

• Account statements

1. Locate your final statement for your IRA account for the previous year. Write down the total year-end value of the account. If you have more than one IRA account, you can either take individual RMDs from each account or aggregate your total account values and withdraw this amount from as few as one. As long as your total RMD is withdrawn, it doesn't matter from which account the distribution is taken.

2. Write down your age as of the end of the previous calendar year. If you're married, write down the age of your spouse as well. If your spouse is more than 10 years younger than you, this will change the calculation of your RMD.

3. Consult Appendix C of IRS publication 590. Under your age, and that of your spouse, locate the factor known as the "divisor." This is essentially your life expectancy, or the joint life expectancy of you and your spouse. As you can see from the chart, the divisor varies depending on your ages.

4. Divide the total value of your account from Step 1 by the divisor in Step 3. This will be the amount of your RMD.

5. Call your financial services firm and verify the amount you have calculated with its internal records. If there are any discrepancies, discuss the matter with your financial adviser.

Tips & Warnings

• Don't wait until too late in the year to take your minimum distribution. If your firm is slow in getting your distribution out, or if there are any operational problems, you are responsible for paying the 50 percent tax on any amount not distributed from your account by year-end.

Resources

• The Internal Revenue Service