If you want to have a financially secure retirement, saving is crucial, and many people use individual retirement accounts (IRAs) to get tax benefits for their retirement savings. However, once you reach the age of 70 1/2, you'll generally need to start taking required minimum distributions (RMDs) from your traditional IRAs. If you don't, you'll face a potentially disastrous 50% IRS penalty on what you should have withdrawn.

With such huge stakes, it's important to get the amount of your required minimum distribution correct. Although some find it difficult to calculate their RMD, the IRS provides an IRA RMD table that gives older IRA holders one of the most important numbers they'll need to take out the right amount.

The IRA RMD table

Age

Distribution Factor

Age

Distribution Factor

Age

Distribution Factor

70

27.4

86

14.1

102

5.5

71

26.5

87

13.4

103

5.2

72

25.6

88

12.7

104

4.9

73

24.7

89

12.0

105

4.5

74

23.8

90

11.4

106

4.2

75

22.9

91

10.8

107

3.9

76

22.0

92

10.2

108

3.7

77

21.2

93

9.6

109

3.4

78

20.3

94

9.1

110

3.1

79

19.5

95

8.6

111

2.9

80

18.7

96

8.1

112

2.6

81

17.9

97

7.6

113

2.4

82

17.1

98

7.1

114

2.1

83

16.3

99

6.7

115+

1.9

84

15.5

100

6.3

   

85

14.8

101

5.9

   

Data source: IRS.

How much do I have to take out of my IRA?

The IRS table above gives you only a piece of the puzzle for calculating the required minimum distribution from your IRA. Before you use the table, you need to look at your account statements for all of the traditional IRAs you own. The base amount on which the calculation is made is the total account balance as of Dec. 31 of the previous year.

Once you have that total, take your age as of the end of the year and look up the appropriate number in the table above. For instance, if you won't turn 70 1/2 until late this year, then you'll still be less than 71 on Dec. 31, and so you'd use the 27.4 factor in the table above.

To calculate your RMD, take your total traditional IRA balances as of the end of last year and then divide it by the factor from the table. You'll need to withdraw that amount by Dec. 31 of this year unless you just turned 70 1/2 in 2018. In that case, you have a one-time extension until April 1, 2019, to take your first RMD.

Road sign with IRA on it.

Image source: Getty Images.

An example

To see how this works, it's useful to work through an example. Say that you have two traditional IRAs, one that had a balance of $80,000 at the end of last year and one with a $40,000 ending balance. And let's say you'll be 89 at the end of 2018.

To figure your RMD, you would add up the two balances of your IRAs, getting a total of $120,000. Then, you'd look up the appropriate number in the IRA RMD table for an 89-year-old. That number is 12.0, so you'd divide $120,000 by 12. The result is $10,000, so you'd have to take out $10,000 from your IRAs by Dec. 31. You don't have to take a proportional amount from each of your two IRAs. It's OK to take the full amount from one, equal amounts from both, or any other way you want to handle it.

2 important things to remember

Most people use the RMD table above, but there's a situation in which you'll need to use a different table. Those who have a spouse who's more than 10 years younger than they are have to use a separate joint life and last survivor expectancy table, which you can find as Table II in this IRS publication. You'll need to know both your age and your spouse's age to get the appropriate factor, but once you have it, the calculation method remains the same.

In addition, the RMD rules apply only to traditional IRAs. Roth IRAs don't require withdrawals regardless of your age, giving you more flexibility to manage your retirement savings as you see fit.

Traditional IRAs make up a huge part of the retirement savings that Americans have accumulated, and it's important to know what the IRS requires you to do with those accounts once you actually reach your golden years. By knowing about the IRA RMD table and how to use it, you won't mistakenly run afoul of the provisions and get yourself into trouble with the IRS.

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