The IRS requires account holders of tax-deferred IRAs, including traditional IRAs, SEP IRAs and SIMPLE IRAs, to take money out starting at age 70 1/2. The first distribution must be taken by April 30 of the following year. Subsequent required minimum distributions must be completed by Dec. 31. Roth IRAs are not affected by required minimum distributions at any age.
Life Expectancy Tables
The IRS issues three life expectancy tables to be used in the calculation of required minimum distributions. The first table, called the single life expectancy table, is only used by people who received the account as a beneficiary. The second table, also called the joint and last survivor expectancy table, is used if your only beneficiary is your spouse and your spouse is at least 10 years younger than you. If neither of the first two tables applies to you, you must use the final table, the uniform lifetime table.
Required Minimum Distribution Size
The IRS calculates the size of your required minimum distribution (RMD) by dividing the value of your IRA, as of the end of the previous year, by your life expectancy as determined by the appropriate life expectancy table. For example, if your traditional IRA values equal $300,000 and your life expectancy equals 21 years, you would divide $300,000 by 21 to find your RMD to be $14,285.71.
Taxes and Penalties
You must include your RMD in your taxable income during the year that you take the distribution. If you fail to take a required minimum distribution, you must pay a 50 percent penalty on the sum that you did not withdraw. For example, if you were supposed to take out $9,200 but did not take out any, you would have to pay a $4,600 penalty.