Retirement & Financial Planning Report

You must withdraw at least a certain amount from your traditional IRA each year after you reach age 70 1/2. If not, you face a 50 percent penalty.


IRS tables set the required minimum distribution (RMD). At age 72, for example, you must withdraw about 4 percent of your IRA balance of the previous December 31. By age 78, the RMD is around 5 percent of the previous year-end’s IRA balance. And so on. You can take out more but you must take at least the RMD. If you withdraw less than the RMD amount, the shortfall will be subject to a 50 percent penalty tax.

Say you have just over $300,000 in your IRA. In your early 70s, your RMD would be around $12,000. If you take out $5,000, for instance, you’d be $7,000 short of your RMD. You’d owe a 50 percent penalty: $3,500.

The official required beginning date, or RBD, for IRA required distributions is April 1 of the year after the year you reach age 70 1/2.