The discussion that follows (as well as the link to the calculator) illustrates the procedure for calculating Required Minimum Distributions (RMDs) for an IRA, 401k, or other qualified retirement plan that you own. Inherited IRAs and other accounts follow a different procedure which we’ll cover in another article. These RMDs for your own, non-inherited accounts are required when you reach age 70½.
Calculating the Required Minimum Distribution
Determine your age in years at the end of the previous year. For example, if you were born on July 10, 1943, your age in years on December 31, 2016 was 73.
Next, get the balance of your IRA account (or accounts) as of the same date, December 31 of the previous year. Continuing our example, let’s say your balance on your year-end statement for your IRA was $104,804.
With your age in years (from the first step), go to IRS Table III, and look up the distribution period for your age in years. This number is an actuarially-calculated expected distribution period for your age.
IRS Table III is specifically for IRA owners who are either single, are married and their spouse is less than 10 years younger, or are married and their spouse who is more than 10 years younger is not the sole beneficiary of the IRA. If your spouse is more than 10 years younger and not the sole beneficiary of the IRA, you must use IRS Table II (find this at www.IRS.gov in Publication 590, Appendix B).
Looking at Table III, we find that the distribution period for age 73 is 24.7 years.
Now, take the balance from last year’s year-end statement ($104,804) and divide by the distribution period (24.7):
$104,804 / 24.7 = $4,243.08
This amount, $4,243.08, is required to be distributed from your IRA by December 31 of the current year. The only time that April 1 of the following year is your RMD deadline is for the year that you reached age 70½.
You must go through this procedure each year that you have an IRA (or other plan, such as a 401k) after you reach age 70½. With IRAs, you’re allowed to combine all plans together and take a single RMD based on the total balance if you wish; with 401k, 403b and other employer plans you must calculate and take the RMD separately for each account.
The Calculator
In the page with Table III, you’ll find an RMD Calculator that you can use to determine your RMDs. Just scroll down past the table, and you’ll find the calculator.