At age 70&1/2 a person must start taking money out of an IRA. At what rate must the money come out?

Answer 1

The IRS has a table that tells you, for a given age, what the distribution period is. (Thats essentially an actuarial guess on how long the IRA holder is expected to live.) You divide the value of the IRA by that number to determine what the minimum distribution is for a given year. You can get this at the IRS website.

Answer 2

For a traditional IRA, you must begin receiving distributions by April 1st of the year following the year you reach age 70 ½. This is referred to as the required beginning date. But the amount that must be distributed by April 1st corresponds to the calendar year in which you reach age 70 ½. If you did not take a minimum required distribution during that year, you have until April 1st of the following year to take it. You must then take the required minimum distribution for each year by December 31st. So, if you did not receive a distribution during the year you reached age 70 ½, you will have to take two distributions the following year: the first, by April 1st, corresponding to the prior year; and the second, by December 31st, corresponding to the current year.

Even if you started receiving distributions from your IRA before you reached age 70 ½, you will still need to calculate and receive the required minimum distribution according to the tax rules, once you reach that age. If you take out more than the minimum required amount in one year, you cannot apply the excess against the minimum required distribution for a future year. At least the required minimum amount must be taken out each year.

Figuring the Required Minimum Distribution

You or your IRA trustee must figure your required minimum distribution each year. This is calculated as the balance in your IRA as of the close of business on December 31st of the preceding year, divided by the applicable distribution period or life expectancy. The distribution period is the maximum number of years over which you are allowed to take distributions from your IRA.

If you have more than one IRA, you will need to separately calculate the required minimum distribution for each IRA. Once you have figured your total required distributions from all your IRAs, you can withdraw this total amount from one of your IRAs, or you can take distributions from more than one, or from all your IRAs, provided the total amount you withdraw is at least as much as the total required minimum distributions calculated for all your IRAs.

Answer 3

there are minimum withdrawal amounts (% of balance) based upon irs actuarial tables which estimate remaining lifespan. Every financial advisor and 401k or ira administrator will have those percentages

Answer 4

Your broker or mutual fund company can normally calculate and establish an annual automatic payout of your required minimum distribution. This way you don't need to worry about remembering to make the withdrawal or withdrawing less than the minimum.