Minimum required distribution (MRD) rules spell out the minimum you must withdraw from your IRA or employer-sponsored plan. You can take out as much as you want, at any time, if you’re willing to pay tax on the withdrawals. Before age 59 1/2, you also may owe a 10 percent penalty.
Many retirees prefer to keep their money inside their plan, for extended tax deferral and greater wealth building. However, you are usually required to take minimum distributions after age 70 1/2, and pay tax on those distributions. Any shortfall is subject to a 50 percent penalty tax.
There are, as is the case with many sections of the tax code, a few exceptions. You can delay distributions from an employer-sponsored plan while you’re still working, no matter how old you are, as long as you don’t own 5 percent or more of your employer-not a consideration for federal employees, of course. Alternatively, you don’t have to take distributions from a Roth IRA. Thus, if you convert your IRA to a Roth IRA, paying the deferred tax, you are not required to follow any withdrawal schedule.
