Withdrawing money from your IRA
||What the heck is a mandatory distribution and when exactly do I have to take it?
The amount of your required minimum distribution
(you'll often see it referred to as RMD) depends
on your IRA account balance at the end of
the year before you reach age 70½.
The balance is divided by a joint life-expectancy
figure for you, the account owner, and your
account beneficiary, which in the case of
many people is their spouse. If you've never
bothered to name a beneficiary (a bad idea),
recent minimum withdrawal rules automatically
assume you've designated a person at least
10 years younger as your IRA beneficiary.
The IRS calculates your life expectancy based on one of three tables. You pick the one that best suits your situation. You'll find these tables in IRS Publication 590. The amount that you are expected to take out will change annually, reflecting the inevitable annual change in your account balance and your life expectancy.
Most people who reach 70½
will use the uniform lifetime distribution
table, unless they have spouses who are more
than 10 years younger or they don't have beneficiaries
at all. Then they use the joint life table.
If you inherited somebody else's IRA and therefore
must take mandatory distributions no matter
your age, you use the single life table. Start
by finding the Internal Revenue Service's
Publication 590 at www.irs.gov.
The joint life and last survivor expectancy
table starts on Page 88. The uniform lifetime
table is on Page 102.
||But what does all this mean in George Washingtons?
To figure out the amount you're required to withdraw the first year, you would divide the value of all of your IRAs as of Dec. 31 of the previous year by the life-expectancy factor for your age.
Suppose you have $200,000 in your IRA Dec. 31, 2007,
and you turn 70½ Sept. 1, 2008.
You would divide the account balance by 27.4
-- the life-expectancy factor in the uniform
lifetime table for age 70 -- because you turned
70 in your first distribution year (which
would be 2008). The result, $7,299.27, is
the amount you would have to withdraw for
the first distribution year.
||How long can I put this off?
can take the first required minimum distribution
at any point during the calendar year in which
you turn 70½. For your first distribution
year, there is also a three-month grace period
that ends April 1 of the following year.
So, if you turn 70-and-a-half in 2008, you would
have to take your first required minimum distribution
by April 1, 2009.