If you have an IRA and you are age 70 1/2 or older, then you must take a required minimum distribution (RMD) from your account, or pay a penalty. While that may sound simple enough, there are important details to be aware of.
RMDs are required for IRAs, SIMPLE (Savings Incentive Match Plan for Employees), SEP (Simplified Employee Pension), and inherited IRAs. Owners of Defined Contribution Accounts may not have to file a report until they retire.
Generally speaking, IRA owners report their RMDs each year by the end of the year. However, the year you turn 70 1/2 may be an exception. If you turned 70 1/2 in the first half of 2015, then you must report an RMD before December 31. If you turned 70 1/2 in the second half of 2015, then you have until April 1, 2016 to report a distribution. But if you wait until April of the next year, then you must report another RMD before December 31 of that year.
If you fail to take an RMD in time, then your excess IRA accumulations may be subject to a 50 percent excise tax. For this reason, if you have forgotten to take any distributions, then it is important to take them as soon as possible.
Calculation of the amount of your RMD is based on your life expectancy and the life expectancy of your spouse. You should follow the tables and worksheets that the IRS makes available, but basically your RMD will be your account balance at the end of the preceding year, divided by an IRS life expectancy factor.
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