What Is the Minimum Required IRA Distribution After 70?

Calculating RMDs

Your annual RMD is your IRA's balance the previous Dec. 31 divided by your life expectancy according to tables the IRS publishes in its Publication 590. Your IRA custodian will typically send a year-end fair market value statement that you can use to calculate your RMD. As an example, if your IRA is worth $50,000 on Dec. 31, 2010, and IRS tables say your life expectancy is 20 years, your 2011 RMD is $50,000/20 = $2,500.

The IRS publishes three life expectancy tables. Usually, you must look up your life expectancy using Table III: "Uniform Lifetime." The exception is if you have a spouse who is more than 10 years younger than yourself, who is also the sole beneficiary of your IRA. If this is the case, you would use Table II: "Joint Life and Last Survivor Expectancy," which gives you a number based on both your age and that of your spouse.

If you are unsure about whether your spouse is your sole IRA beneficiary, check with your IRA custodian -- the bank or financial institution in charge of maintaining your account. Rather than name an IRA beneficiary in your will, you file paperwork with the custodian. These documents are legally binding after your death, though you are welcome to add and remove beneficiaries as long as you live. You should review your beneficiary papers periodically to make sure they are current.

Your required beginning date is the deadline by which you must take your first RMD: April 1 the year after you turn 70-1/2. Each subsequent year, your deadline is Dec. 31. So, for example, if you turned 70-1/2 in June 2010, your required beginning date is April 1, 2011. You must take your next RMD by Dec. 31, 2012, and your deadline is Dec. 31 each year after.

If you do not take your RMD by the appropriate deadline, the IRS penalizes you 50 percent of the amount you should have withdrawn. If, for example, in 2011 your RMD is $5,000, but you only take $2,000 by Dec. 31, the IRS charges you $1,500 for this infraction, which is half of the additional $3,000 you should have withdrawn. The penalty is steep to prevent investors from keeping their assets in IRAs indefinitely, since assets inside the account are not taxed.