Calculating Your RMD

To calculate your required minimum distribution on your own, you should follow these five steps:

  1. Determine your age on December 31 of the year in which you reach 70-1/2. That is, if you were born April 10, 1926, you will reach age 70-1/2 in 1996 and will still be age 70 at the end of 1996. (If you were born on August 31, 1925, you will also reach age 70-1/2 in 1996, but you will be age 71 at the end of 1996.)
  2. Determine the age of the primary beneficiary of your IRA account at year-end. In this example, assume that your spouse is your primary beneficiary and will be 66 years old on December 31, 1996.
  3. Find the joint life expectancy figure for you and your beneficiary in the life expectancy tables of IRS Publication 590. In this example, your joint life expectancy is 22.5 years, based on year-end ages of 70 for you and 66 for your beneficiary.
  4. Determine the total balance of your IRAs as of December 31 of the prior year (1995, in this case). For this example, assume you have a total balance of $200,000 at year-end 1995.
  5. Calculate your required minimum distribution for 1996 by dividing your year-end 1995 asset balance by your life expectancy factor. In this case, $200,000 divided by 22.5 equals $8,889, or 4.4% of your total retirement plan balance.

Under IRS regulations, you would be required to withdraw at least $8,889 from your IRA by April 1, 1997. Remember, even though you would not be required to take this distribution until April 1, 1997, it represents your required minimum distribution for 1996. Your required minimum distribution for 1997 will have to be made by December 31, 1997, resulting in two taxable distributions for tax year 1997.