IRA Required Minimum Withdrawals

August 25th, 2007  |  Published in IRA  |  9 Comments

The government requires that by April 1 following the year in which you turn 70.5, you are required to being taking minimum withdrawals from your IRAs, excluding the Roth IRA. The amount you are required to withdraw is based on a calculation (use this calculator) and that value is an annual number.

The example calculation is based on a $100,000 account balance and an 8% rate of return (based on a 27.5 year remaining life expectancy) and it requires that you take a minimum $3,649.64 withdrawal each year. The calculator is based on the published rules as of April 2002 and the calculator was last updated January 2006.

If you don’t take the required minimum withdrawals, then you are penalized 50% on the amount you were short by. So let’s say you were required to withdraw $5,000 and you only withdraw $1,000, then you actually owe a penalty of $2,000! So, be sure to take the minimum withdrawal or you’ll face a penalty but you can do whatever you want with it, including reinvesting it into the market (even into your Roth IRA if you meet the restrictions).

  

Responses

  1. Duke says:

    August 27th, 2007 at 7:02 pm (#)

    Are you aware of the IRA investments with an annuaity death benefit that is subject to being recuded by your annual minimum withdrawal? Do you know what the actual costs are in redued death benifits? Is anyone looking into who is profiting from this law? It certainly isn not the elderly person — or any of the potential heirs — or the government who loses taxable income from inheritance. At what point do you think that people are going to become aware of this situation? What can we do about this situation?

  2. Bonnie says:

    August 28th, 2007 at 12:11 pm (#)

    Hi,

    I just found this blog, and I’m enjoying it!

    Use this site to get your RMD amount:

    http://www.finance.cch.com/sohoApplets/RetireDistrib.asp

  3. Advanced Personal Finance » Blog Archive » Carnival of Personal Finance #116 - NSA Edition says:

    September 3rd, 2007 at 9:36 pm (#)

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  9. Ray Richards says:

    July 23rd, 2010 at 11:05 am (#)

    How does the Required Minimun Distribution from a 403(b) retirement plan in Texas affect social security benefits?