IRA Withdrawal Rules for 70-year-olds
Investors in a traditional IRA can begin withdrawals aged 59-and-a-half but must do so at the age of 70 --or more specifically, from the financial year in which they reach 70-and-a-half years old. From this point there is an annual minimum withdrawal, calculated as an increasing percentage of the money remaining in the IRA.
Other People Are Reading
-
Context
-
An IRA, or Individual Retirement Account, is a tax-advantaged retirement savings plan. There are two main types, a traditional IRA and a Roth IRA. In a traditional IRA, the money put in is deducted from the person's taxable income; the person then pays tax when he withdraws the cash the plan. In a Roth IRA, the money put in is taxed at the time, but there are no taxes when the person withdraws the money.
Allowable Withdrawal Age
-
Except for a few special cases, individuals are normally not allowed to withdraw from an IRA plan until they are 59-and-a-half years old. This applies both to traditional IRA and Roth IRA accounts. There is no requirement to retire from work before taking money out of an IRA plan, as long as the age limit is met.
-
Mandatory Withdrawal Age
-
There is no mandatory withdrawal age for a Roth IRA. In fact, it is technically allowable to never take the money out of the plan. A person must begin taking money out of a traditional IRA plan from the age of 70-and-a-half years. There is then an annual minimum withdrawal, which is based on a percentage amount that increases each year as the person grows older.
Distribution Period
-
The annual minimum withdrawal is calculated by dividing the money remaining in the plan by a set distribution period. This distribution period declines each year, representing the fact that the person's life expectancy is dropping. In practice, people do not need to know the applicable distribution period for each year as the tables that contain these details also contain the important figure, namely the resulting minimum withdrawal percentage.
Percentage
-
A person who turns 70-and-a-half must withdraw at least 3.65 percent of the money in the fund that year. The following year he must withdraw 3.77 percent; the year after that 3.91 percent; the year after that 4.05 percent, and so on with the figure increasing by a greater amount each year. This continues until the person reaches the age of 115, after which time the annual minimum withdrawal is fixed at 52.63 percent.
-
