This week on The Crash Proof Retirement® Show, Phil Cannella and Joann Small continued the Crash Proof Course on IRAs by discussing one of the more complicated aspects of these accounts: Required Minimum Distributions, or RMDs.
On the surface, RMDs seem simple—starting at age 70 ½, you must take out a certain percentage of your IRA balance out every year, and pay taxes on the portion withdrawn. But what conditions apply? What time of year should you take your distribution? What happens should you forget to take a distribution one year? And how are RMDs affected by converting to a Roth IRA?
Phil Cannella and Joann Small covered all these topics—and others—on today’s show. So now that you know you must take a RMD annually, how do you know what amount to withdraw? That’s where the Uniform Lifetime Table can help.
The table works by taking your remaining life expectancy at a certain age, and dividing 100 by that number. The quotient is the amount of your RMD for that year. So hypothetically, a person who could expect to live another 10 years would divide 100 by 10, resulting in a RMD for that year of 10% of the entire IRA.
Unfortunately, most life expectancy numbers aren’t easy, round figures. Therefore, refer to this helpful chart when calculating your RMD for 2014 and beyond!