Calculating Minimum IRA Distributions

From IRS Publication 590: Individual Retirement Arrangements (IRAs)

If you have a traditional IRA you must begin taking distributions in the year following the year you reach 70-1/2 years of age. In order to figure your required minimum distribution for each year, you divide your IRA account balance as of the close of business on December 31 of the preceeding year by the applicable distribution period or life expectancy.

For example: Joe, born October 1, 1934, reached 70-1/2 in 2005. His wife and beneficiary, Betty, turned 56 in September 2005. Joe must begin receiving distributions by April 1, 2006. Joe's IRA account balance as of December 31, 2004 is $30,100. Because Joe's wife is more than ten years younger than Joe, and is the sole beneficiary of his IRA, Joe uses Table II in Appendix C of IRS Publication 590. Based on their ages at year end (December 31, 2005). the joint life expectancy for Joe (71) and Betty (56) is 30.1 years. The required minimum distribution for 2005 is $1,000 (that is, $30,100 / 30.1). This is the minimum amount that must be distributed to Joe by April 1, 2006.

This tool helps calculate the minimum distribution you must take, by looking up life expectancy or distribution period in tables found in IRS Publication 590, and dividing your balance by the appropriate figure. This tool is for "traditional" IRAs, that is, IRAs other than Roth IRAs or Simple IRAs, and is based on regulations in effect for the 2005 tax year. Life expectancy and distribution period tables, and other regulations regarding IRAs may be subject to change in future tax years.

To prepare a comprehensive retirement plan, or for more information, please contact Jonathan E. Brochstein at Weston Wealth Strategies—(203) 319-9876 or contact Jonathan via email.

For even more information, download IRS Publication 590