Starting at age 70-1/2, you must take required minimum distributions (RMDs) from your IRAs, and pay income tax on the money you withdraw. Here’s how the calculation works:
* Determine the December 31 balance. Your IRA balance on December 31, 2011, for example, will be used to calculate your RMD in 2012. If you have multiple IRAs, you’ll need to find the total in all of these accounts.
* Check the appropriate table. In IRS Publication 590, various tables are included. Most people will use the Uniform Lifetime Table. At age 76, for example, this table shows that you’ll take distributions over 22 years.
If your prior year-end balance was $250,000, for example, your RMD for the current year would be $250,000/22, or $11,364. You can withdraw more, but not less. Any shortfall will trigger a 50% penalty. If you are supposed to withdraw $11,364 this year and you don’t take any distribution, your 50% penalty would be $5,682.
