Figuring required minimum distributions

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Dear Tax Talk,
In computing the minimum amount of distribution I must begin to take at age 70½, do I include those amounts accumulated in Roth IRAs? As they are tax free (I’ve held them for many years), I don’t see why they would be added to the total amount of IRAs I have, used to compute the minimum distribution. Am I correct?
— Thomas

Dear Tax Talk,
Regarding the RMD: If I know the total dollar amount to be withdrawn from all of my IRAs, can I just take a lump sum from one account?
— Charles

Dear Thomas and Charles,
Since both of your questions are related, this is a joint answer.

RMD stands for required minimum distribution. You can’t leave your money forever in a traditional IRA. You have to begin taking RMDs by April 1st of the year following the year you turn age 70½. For example, this is 2010, so individuals born before July 1, 1940, need to begin their RMD by April 1, 2011. If you wait until April 1, 2011, you’ll have to take two required minimum distributions in that year. If you double up, it may cause you to pay higher tax than if you spread it over 2010 and 2011. Remember, the higher your income, the greater the amount of Social Security benefits that are taxable.

A traditional IRA is the original IRA that was started way back in the ’70s. It is labeled traditional as to distinguish it from a Roth IRA. Thomas, there is no RMD that applies to a Roth IRA. You can leave all your money in a Roth until you die.

RMD is computed based on a person’s age and can be based on joint lives. That is, you can choose to receive your required minimum distribution based on your life expectancy at your age and the life expectancy of another person, such as your spouse. If the other person is younger, this will lower your required minimum distribution. Life expectancy tables can be found in IRS Publication 590. Usually, your IRA custodian will help you compute the RMD.

If you have more than one traditional IRA, you must determine a separate required minimum distribution amount for each IRA. However, you can total these minimum amounts and take the total from any one or more of the IRAs. You would not include the balances of any Roth IRA. Below is an illustration taken from IRS Publication 590.

Example: Sara, born Aug. 1, 1939, became 70½ Feb. 1, 2010. She has two traditional IRAs. She must begin receiving her IRA distributions by April 1, 2011. On Dec. 31, 2009, Sara’s account balance from IRA A was $10,000; her account balance from IRA B was $20,000. Sara’s brother, age 64 as of his birthday in 2010, is the beneficiary of IRA A. Her husband, age 78 as of his birthday in 2010, is the beneficiary of IRA B.

Sara’s required minimum distribution from IRA A is $377 ($10,000 divided by 26.5 — the distribution period for age 71 per Table III). The amount of the required minimum distribution from IRA B is $755 ($20,000 divided by 26.5). The amount that must be withdrawn by Sara from her IRA accounts by April 1, 2011, is $1,132 ($377 plus $755).

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