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Required Minimum Distributions from IRA Rules

The amount that must be distributed annually from an Individual Retirement Account (IRA) account once an individual reaches age 70 ½ is called a Required Minimum Distribution (RMD). The first distribution can be delayed until April 1st of the succeeding year; however if this is done then the individual will receive two distributions in that year. Example: You reached 70 ½ on August 20, 2010. For 2010 you must receive your RMD from your IRA by April 1, 2011. You must receive your RMD distribution for 2011 by December 31, 2011. You will report both IRA distributions on your 2011 individual income tax returns.

Subsequent RMD distributions must be made by December 31st annually. IRA owners are responsible for taking the correct distribution – and they may face penalties for failure to take the RMD. Even if you begin receiving distributions from your IRA before age 70 ½, you are required to begin calculating and taking RMD’s once you reach age 70 ½. If, in any year, you receive more than the required minimum distribution for that year, you will not receive a credit for that additional amount when determining the RMD for the next year. If you fail to take your RMD from your IRA account in any year after you reach age 70 ½ ‐ penalties of up to 50% may apply.

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It is important to understand the basic rules on the Required Minimum Distributions from your IRA. If you have any questions, click here to contact us for additional information.