March 19, 2015 in IRA

Count wife’s balances to determine IRA RMD?

Dear Tax Talk,

I have reached 70 years of age and am required to take required minimum distributions from my IRAs. My wife is 66 and also has IRAs in her name. We file a joint return. Do I need to include my wife’s IRAs in our RMD calculations, even though she is not 70 1/2 years old?

— Pradeep

Dear Pradeep,

No, you do not need to include your wife’s IRAs when you are calculating your required minimum distribution, or RMD. Even though you are filing your tax return using the filing status “married filing jointly,” each of you is considered to have your own separate IRAs and, RMDs will be calculated separately at the required time. Your wife’s IRA can continue to enjoy tax-free growth on the amounts invested until she reaches age 70 1/2, when amounts distributed become taxable to her as they are withdrawn.

The IRS requires that your initial RMD be made by April 1 of the year following the year you reach age 70 1/2. The amount distributed is based on the IRA balance on Dec. 31 of the preceding calendar year, and then using the tables provided by the IRS. The trustee of your IRA will be able to assist you with this matter, and you will also have the option to have taxes withheld when the payment is made to you.

How to calculate your IRA RMD

  • Check the balance of your tax-deferred IRA accounts as of Dec. 31 of the previous year.
  • Determine which of the three tables in Publication 590-B applies to your situation.
  • If it’s the most commonly used Table III, look for your age and the corresponding distribution period. For example, if you are age 71, your distribution period is 26.5.
  • Divide each account balance by the distribution period to determine your RMD.

Example: You had $300,000 in your IRA as of Dec. 31 last year. You must withdraw $11,321 to meet your required minimum distribution. If you take out more than this amount, it doesn’t count toward next year’s RMD.

Note that with IRA accounts, you can aggregate the balances in all your IRAs, determine your RMD for each of them, and take the required distribution from one of them if you like. If you have workplace retirement plans, you must take the appropriate distribution from each of them.

You may want to consider sitting down with a tax professional who can assist you in determining the amount of taxes you will owe now that you will be taking your RMDs. Because of the increase in your income, some of your Social Security benefits may be taxable, as that calculation is based on your filing status and income level.

Thanks for the great question and all the best to you in your retirement years.

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