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Sunday, December 8, 2013

Calculating the Required Minimum Distribution

As IRA and 401(k) holders approach their 70s, they need to start thinking about required minimum distributions.  Inherited IRA holders need to know the RMD as well.  Get it wrong, and there is a hefty tax penalty!  Here is the IRS link with the questions typically asked about the subject:  Retirement Plans FAQs regarding Required Minimum Distributions.

Before doing the calculation, first check your online broker site.  The amount you need to withdraw may be there.  For example, with Schwab, just click "Balances" and scroll to the bottom to find:

Source: Schwab

Done!  At least for this account.

Because this is the first RMD, it doesn't have to be taken until 4/1/2014; but next year's RMD will need to be taken by 12/31/14.

Note the footnote link to a calculator for distributions required from inherited IRAs!

An easy-to-use calculator for the DIYer is provided by FINRA.  Only 2 inputs required: previous year balance and age.

Source: FINRA

The results then are shown as:

Source: FINRA

1 comment:

  1. Thanks for touching upon this important topic. I don't see a whole lot of coverage on this in the blogosphere.

    The best part of the internet are the free tools that are available to make the life of the individual investor less stressful! I'm glad Schwab made the calculator available to everyone and not just account-holders.