Chapter 6 - RMDs For Age 71 And Beyond

Taking RMDs At Age 71 – Timing And Deadlines

If you are age 71 or older, you may already be taking Required Minimum Distributions from your retirement accounts. Making the correct withdrawals on time is crucial. If done incorrectly, the government may charge you an excise tax for as much as 50% of the amount you were supposed to withdraw. This is covered in detail on the IRS website.

Upon turning age 71 you must make an RMD by December 31st of each year. You will use the previous year’s December 31st balance for the calculation. Each year that goes by you must continue this process. By this time one RMD for turning 70 ½ should have already been taken.  

Calculating An RMD Can Be Complicated 

Let’s look at an example. If Susan turned 75 last year, she will need to take an RMD by December 31st of this year with a calculation specific to age 75. Then she will need to take an RMD by December 31st of next year calculated on age 76, and each year into the future that she is alive and there are still funds in the account.

For our example, Susan is 75, her spouse is close to her age, and the account is a Traditional IRA. Calculating Susan’s RMD requires a formula, a December 31st statement of the previous year, and IRS Publication 590-B – Distributions from Individual Retirement Arrangements. 

If Susan has an IRA with an account balance of $100,000 as of December 31st of last year, her RMD would be $4,366.81. Here is how she would get to that number. First she locates the correct table in the IRS Publication 590-B. 

Use The Correct Table

She needs to be careful, because there are several tables in this document and she must make sure to use the correct one. Once she has found the correct table, in this example it’s the Uniform Lifetime table, she finds her age, which is 75. Next to the column with her age, she will find a number called the Distribution Period. 

Susan will then take the Distribution Period number, in this case it’s 22.9, and divide it by her IRA account balance referenced earlier, which is $100,000. The result is $4,366.81 (100,000 / 22.9 = 4,366.81). 

RMD Calculations Are Different Each Year

This calculation process must be repeated annually until her account balance is zero, or until Susan’s passing. Those who inherit the account, called beneficiaries, must make sure Susan’s last RMD was withdrawn, and will proceed using a similar set of calculations, assuming there are still funds in the account. The beneficiaries will also have a couple new RMD options as well. See this page for more information. 

Watch Out For Errors

You can see that there is room for error, because the math for RMD calculations takes a few steps, and the figures change each year. If you are the owner of a retirement account, it is your responsibility to take RMDs at the proper time. To learn more visit the IRS website and review forms 590-B, 560, 571, 575, and 939. 

Provision Retirement Can Help With RMDs

We help our clients calculate and manage their RMDs, and coordinate them with their long term retirement plan. Contact us today to learn about our services.

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