Meeting IRA withdrawal rules

Most account holders use Table 3, known as the uniform lifetime table. It is for singles and married savers with spouses closer to their own ages. The IRS has revised calculations in this table to reflect today's longer life spans. Under the new distribution guidelines, an individual with sufficient income from other sources can withdraw less from a retirement account, letting it grow for a while longer.

Withdrawal exceptions

The IRS does allow a few instances in which you don't have to touch your retirement money just yet.

First, if all your retirement savings are in a Roth IRA, you're exempt from this rule. Earnings in Roth accounts are tax-free, and you can leave your money in there as long as you like.

Second, if you are still working, you can wait until you actually retire before you collect from your company pension or 401(k). But if you have other, nonwork-related accounts, such as an IRA other than a Roth, you have to start taking money from them now.

Third, if you've already withdrawn the minimum required amount last year when you celebrated your 70 1/2 birthday or you did so last April 1, you will be covered for the 2014 required distribution year. You will, however, need to take your 2015 RMD amount by Dec. 31.

Other withdrawal rules

Even if you've been tapping retirement accounts before you became a septuagenarian, now you must keep a close eye on exactly how much you take out. All subsequent withdrawals must meet the IRS mandatory amounts.

You can always take out more than the required amount. But that won't affect distributions in future years. Say, for example, your required withdrawal this year is $1,500 but you take out $2,000. You can't carry that $500 over to count against the next required distribution. But, because you've reduced your IRA balance, your subsequent minimum distributions will likely be lowered.

Do you have multiple retirement accounts? Then you must figure the minimum withdrawal amount for each, but you don't necessarily have to raid them all. If you have several IRAs, you can add the separate amounts and take the total from just one. However, you do have to take required minimum distributions from each workplace account separately.

If you made any nondeductible contributions to your traditional IRA, make sure you have the paperwork to back that up. This is part of the reason that you need to file Form 8606, which tracks these amounts and establishes your cost basis in your account. Your nondeductible contributions are not taxed when you withdraw them. Rather, they are a return of your investment (i.e., your cost basis) in your IRA.

The IRS will let you take your required distribution in installments. Just make sure that these disbursements, be they monthly, quarterly or some other increment, total at least the yearly minimum amount you're obligated to withdraw.

Spending not required

While the IRS says you must take a specified amount of money out of your traditional IRA or other similar retirement plan, that doesn't mean you have to spend it.

The agency is interested only in collecting some of the deferred taxes on your account. That goal is accomplished as soon as you take the distribution.

If you don't need that money, or as much as you had to take out, to meet your living expenses, you can redeposit any or all of the distribution in another nonretirement savings account where it will keep earning interest for you. That's OK by the IRS, since it will get its share of these taxable earnings, too.

Bankrate's search pages can help you find the best rates on certificates of deposit or money market accounts that might be good places to stash any required IRA distributions you don't want to spend right away.

Also, keep an eye on Congress. For the last few years, lawmakers have allowed older IRA owners to directly transfer their RMD amounts to a qualified charity. This meets the withdrawal requirements, but the money is not taxable because it goes straight to the charity without passing through IRA owners' hands. That option expired at the end of 2014, but there is support on Capitol Hill for continuing it in 2015 and beyond.


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