Rules for Required IRA Distributions

It’s the time of year when I start receiving questions about required minimum distributions from IRAs and other retirement-savings plans. Generally, you must take distributions every year after you reach age 70½. Here are some of the top questions -- and answers -- about how RMDs work.

How are RMDs calculated?

The required minimum distribution is based on your account balance as of the end of the previous year and your life expectancy according to IRS tables. You can get those numbers in the appendix to IRS Publication 590 (most people should use Table III, the Uniform Lifetime table, unless your beneficiary is a spouse who is more than ten years younger than you), or can use our RMD calculator. Your IRA administrator can help you with the calculations, too.

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Do I need to calculate the RMD separately for each account, or do I add up all of my account balances?

There is one set of rules governing distributions from traditional IRAs and another for employer-based retirement plans. If you have more than one traditional IRA, your required withdrawal is based on the balance in all of them, but you can withdraw the money from one or more accounts. (Roth IRAs, on the other hand, have no minimum distribution requirements.) If you have multiple 401(k)s, you must calculate the required distribution for each one separately and then withdraw the required amount from each account.

Do I need to take RMDs even if I’m still working?

You need to take required minimum distributions from traditional IRAs after you reach age 70½, even if you’re still working. But you can delay tapping your 401(k) or other employer-based retirement plan at your current job until after you stop working. However, you must start taking RMDs from previous employers’ 401(k)s by age 70½.

I just turned 70½. When do I need to take my first RMD from my IRA?

You get a little extra time to take your first RMD. You have until April 1 of the year after you turn age 70½ to take your first required withdrawal. But you may not want to wait that long because you must take your second withdrawal by December 31 of that same year. Two IRA withdrawals in one year could significantly boost your tax bill. You must take withdrawals by December 31 every year after that.

Can I take more than the minimum withdrawal?

Sure. You can withdraw as much as you want. But remember that you will owe taxes on all the money you withdraw from your traditional IRA (unless you made any after-tax contributions). You must withdraw at least the required minimum each year, or else you’ll have to pay a 50% penalty on the amount you should have withdrawn but didn’t.

What about Roth IRAs?

You don’t need to take RMDs from Roth IRAs and any money you choose to withdraw is tax-free.