The rules that surround our retirement plan accounts and IRA’s can be tricky, especially when it comes to determining an individual’s required minimum distributions, or RMDs.
RMDs are the minimum amounts that a retirement plan account owner must withdraw as required by the federal government. Generally, a person is required to take RMDs from an IRA or retirement plan account in the year when he or she reaches age 70 ½ or later. If the retirement plan is an IRA or the account owner is a five percent owner of the business sponsoring the retirement plan, the RMDs must start once the account holder is age 70 ½ regardless of whether he or she is retired.
The rules for minimum distributions can be confusing, but a person’s RMD for any year is the account balance as of the end of the preceding calendar year divided by a distribution period from the IRS “Uniform Lifetime Table.” This is the way most people will calculate their RMD. However, if a spouse is the sole beneficiary of an IRA, and is more than 10 years younger, the Joint Life and Last Survivor Expectancy table must be used. A person is also allowed to take penalty-free distributions from their IRA or retirement account plans at age 59 ½.