When must my
required minimum distributions begin?
For traditional and SEP IRAs, the beginning date for required
minimum distributions is April 1 of the year that follows the year
you attain age 70.5. Each subsequent year's distribution must be
made by December 31. If you do not take a distribution in the year
you become 70.5, you must take distributions for two years in the
following year, withdrawing the first year's required minimum
distribution by April 1 and the second year's required minimum
distribution by December 31. A required minimum distribution is
taxable in the calendar year you receive it.
How much must I withdraw?
Although you can withdraw any amount desired, you must withdraw a
minimum amount. The required minimum distribution amount for any
year is calculated by dividing the adjusted account balance as of
December 31 of the previous year by the applicable life expectancy
factor.
How is the life expectancy factor determined?
Required minimum distribution rules provide only two methods for
determining annual life expectancy factors for IRA owners.
- Most IRA owners will use a Uniform Distribution Table, which
assumes a joint life expectancy based on your age at the end of
a distribution year, and having a beneficiary who is at least
ten years younger.
- When you name as sole beneficiary a spouse who is more than
ten years younger, you'll use a joint life expectancy factor,
based on your ages at the end of a distribution year, if your
spouse has been sole beneficiary for at least one full year.
Must I name a beneficiary to use the Uniform Distribution
Table?
No. The names of beneficiaries are disregarded unless the
only beneficiary for the entire year is your spouse, who is younger
by more than ten years.
How will the annual calculation be affected if I change my
beneficiary designation to or from a spouse who is at least 10 years
younger?
Such a designation must be in place for the entire year to allow use
of an actual joint life expectancy table. IRS regulations may
provide that a change, which is due to the death of the younger
spouse, will not affect the calculation.
What is the penalty for failure to withdraw the required
minimum distribution?
If you do not withdraw the required minimum distribution by the
required distribution date, a penalty tax of 50% will be assessed on
the excess accumulation (the amount of the required minimum
distribution not withdrawn).
Are rollovers or transfers allowed during and after the year I
turn 7O.5?
Yes.
What about multiple IRAs?
You must calculate the required minimum distribution separately for
each IRA you own. However, you may take the total required minimum
distribution from any one of your personal, traditional IRAs.
What if distributions in prior years exceeded the required
minimum distribution?
Withdrawing more than the required distribution is allowed; however
you cannot apply the excess amount as a credit toward future years'
required minimum distributions.
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