Chapter 5 - Calculating RMDs at Age 70 1/2

RMDs Typically Begin at 70½

When you turn 70-1/2, depending on the type of account you have, you may need to take Required Minimum Distributions. According to the rules on the IRS website, this RMD due date is April 1st in the year after you turn 70-1/2. If you have multiple retirement accounts, each may require this important step.  

Calculating an RMD Can Be Complicated 

Here is an example of how to do this for a person who is turning 70-½, their spouse is close to their age, and the account is a Traditional IRA. Let’s say his name is Robert. 

First, Robert would begin with the IRS Publication 590-B, called Distributions from Individual Retirement Arrangements. This lengthy publication can be confusing. So he will want to look at it very closely.

Next, Robert would need to locate the correct Uniform Lifetime table, and look up his age. Next to his age he will find a number, this is called the Distribution Period. But he needs to be careful, because there are several tables in this document and he must make sure to use the correct one. 

At this stage the math begins. According to the table, the Distribution Period for age 70 is 27.4. He would divide his IRA balance displayed on his December 31st statement of the previous year, by the Distribution Period. 

For example, If the account balance was $100,000, and the Distribution Period was 27.4, then the RMD will be $3,649.64 – the amount that must be withdrawn out of his account by the due date. 

If his RMD is not done on time, the IRS may impose an excise tax of up to 50% of the amount that was supposed to be withdrawn. Always check current rules, as Congress may change the Distribution Period in the future. We help clients stay up to date on rule changes. Taxes usually need to be withheld out of the withdrawal. This is something to check with your tax advisor about.  

Proceed With Caution.

Be careful, as there is room for error when making RMD calculations. A similar process must be repeated each year after age 70 ½, and the figures to determine the withdrawal will change each year as well. You can learn more by visiting the IRS website. 

We Can Help with RMDs

At Provision we help our clients understand which accounts will require specific RMDs, and how to calculate them. Contact us today for help with this important retirement planning step.