Required Minimum DistributionsThere are two magic numbers when it comes to traditional IRAs 59½ and 70½. 59½ is the age when you may begin taking distributions penalty-free, and 70½ is when the IRS requires that you take those distributions.
These required minimum distributions (RMDs) apply to various retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, and workplace retirement plans. Roth IRAs are not subject to RMDs.
RMD payments must begin in the year you reach age 70½. You have until April 1 of the next year to take the first distribution. Each distribution thereafter must be taken by the end of the year. If you turn 70½ in 2013, your first RMD must be withdrawn by April 1, 2014.
Required minimum distributions must be calculated for each individual IRA you own, but you may add these amounts together and take your distribution from a single account.
If you withdraw more than the required amount in a given year, that excess will not be credited toward future distributions.
Taxes and PenaltiesDistributions from IRAs are included in your gross income and are taxed at your normal tax rate.
If you don't take a minimum distribution or don't take the entire required amount, there may be an excess accumulation penalty of 50% on the amount not distributed. You will be expected to withdraw the required amount from your IRA in addition to paying the penalty.
Because of the technical nature of required minimum distributions and the severe penalties which may be encountered, you may want to consult a tax advisor for guidance. However, you can use our Required Minimum Distribution (RMD) Worksheet to get an idea of what your RMD may be. Our Investment Specialists are available to answer any questions at 1-800-359-3379. They can also help you calculate your required minimum distributions.