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Retirement Basics
An egg and money in a bird's nest with at $1 bill in the background
Know your required minimum distribution

So, for example, a 74-year-old man using Table III would get a distribution period of 23.8 years. If his account balance had been $50,000 Dec. 31, 2009, he would have divided $50,000 by 23.8, giving him an RMD of $2,100.84 for 2010.

Note that if you receive more than your RMD in any given year, you will not receive credit for the additional amount when determining distributions for future years.

Use Bankrate calculators to figure your minimum IRA withdrawal.

A lot saved?

Be aware, too, that if your account balances are big enough, your RMDs could bump you into a higher tax bracket.

If your modified adjusted gross income is less than $100,000 and you are otherwise eligible, you might consider converting your traditional IRA to a Roth retirement account, which eliminates the need to take required minimum distributions.

Once you reach age 70½, you are not allowed to roll over amounts that must be distributed in any given year, but you can roll over the rest of your IRA to avoid required distributions in the future. (You'll owe tax on any amount you roll over.)

Kay Bell, Bankrate's tax editor, notes  that in 2009, taxpayers were able to use qualified charitable donations to lower their RMD.

"Instead of giving $3,000 to a charity, eligible IRA owners could directly transfer those funds from the retirement account to a charity," she says. "The rollover to the nonprofit counted as a charitable contribution."

This option expired Dec. 31, 2009. However, it is part of a package of tax bills that Congress is expected to extend at least through 2010. If the law is continued, older IRA owners can use such transfers to satisfy their required minimum distributions, keeping that money from bumping them into a higher tax bracket.


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