Saving for retirement is important, and IRAs can help you accumulate enough assets to have a comfortable retirement. But the IRS only lets you hold onto your traditional IRA for so long before you have to start taking money out of the account. Required minimum distributions kick in when you turn 70 1/2 years old, and the following table gives you the most important numbers you'll need to calculate your RMD.
|
Age |
Distribution Factor |
Age |
Distribution Factor |
|---|---|---|---|
|
70 |
27.4 |
93 |
9.6 |
|
71 |
26.5 |
94 |
9.1 |
|
72 |
25.6 |
95 |
8.6 |
|
73 |
24.7 |
96 |
8.1 |
|
74 |
23.8 |
97 |
7.6 |
|
75 |
22.9 |
98 |
7.1 |
|
76 |
22.0 |
99 |
6.7 |
|
77 |
21.2 |
100 |
6.3 |
|
78 |
20.3 |
101 |
5.9 |
|
79 |
19.5 |
102 |
5.5 |
|
80 |
18.7 |
103 |
5.2 |
|
81 |
17.9 |
104 |
4.9 |
|
82 |
17.1 |
105 |
4.5 |
|
83 |
16.3 |
106 |
4.2 |
|
84 |
15.5 |
107 |
3.9 |
|
85 |
14.8 |
108 |
3.7 |
|
86 |
14.1 |
109 |
3.4 |
|
87 |
13.4 |
110 |
3.1 |
|
88 |
12.7 |
111 |
2.9 |
|
89 |
12.0 |
112 |
2.6 |
|
90 |
11.4 |
113 |
2.4 |
|
91 |
10.8 |
114 |
2.1 |
|
92 |
10.2 |
115 or over |
1.9 |
Data source: IRS.
How to use the IRA RMD table
The method you'll use to calculate exactly how much you have to take out of your traditional IRA each year begins with the age-determined factor above. First, start by adding up the value of your traditional IRAs as of Dec. 31 of the previous year. Then, take the total and divide it by the distribution factor from the table that corresponds to your age as of the end of the current year. The result is your required minimum distribution for the year. You must withdraw that amount by Dec. 31, except that in the year you first turn 70 1/2, you have until April 1 of the following year to take the initial RMD.
For example, say that you're turning 76 in 2017 and have a traditional IRA that was worth $110,000 at the beginning of the year. The distribution factor for a 76-year-old is 22.0. Divide $110,000 by 22.0 and you'll get $5,000, which is the amount you must withdraw.
Image source: Getty Images.
There's one very important exception to using the IRA RMD table. If you're married and your spouse is more than 10 years younger than you are, then a separate set of IRA RMD tables applies. With this table, you'll look up the appropriate factor based on both your age and your spouse's age. These tables are too long to reproduce here, but the net impact is that, under these circumstances, you can typically take smaller required minimum distributions than you'd have to take if you and your spouse were closer together in age.
Some other things to remember about RMDs
The key reason why required minimum distributions are so important is that the IRS imposes a huge penalty if you don't take them. The penalty is 50% of the amount of the RMD. It's critical not to forget about RMDs, or to miss the deadline.
Also, bear in mind that RMDs only apply on your traditional IRAs. If you have a Roth IRA, then there is no requirement to take distributions regardless of how old you are.
Retirement accounts are valuable ways to save, but all good things must come to an end. By knowing how to read the IRA RMD table from the IRS, you'll be able to comply with the rules governing traditional IRAs and avoid what could be a painful penalty.
