You probably know that when you reach the age of 70½ you are required to make annual withdrawals from your retirement accounts upon which you will be taxed. There is a one time allowance that lets you wait until April 1st of the year following your age of 70½ for your first RMD, but if you do that you still need to withdraw from your IRA’s your second RMD in that same year by December 31st, which means two RMD’s in one year. For that reason, I often counsel my clients to take the first RMD in one tax year and then the second in the following tax year. Remember, each year RMD’s must be withdrawn by December 31st or there will be a tax penalty of 50% on the amount that was not withdrawn in time.

For an inherited IRA, you will have to take your first RMD beginning in the year that follows the death of the account owner.

So, how hard is it to calculate the RMD? Fortunately, it is simple if you follow these steps:

**1.** Find your retirement value for all IRA’s collectively on December 31st of the previous year. This sum will be used in the numerator of the formula that is mentioned below. All 401(k)’s and 403(b)’s will each have their own RMD so you will leave these balances out of this equation and you will have to perform the same steps individually for each of these types of employer accounts you own which were not rolled over into an IRA.

**2.** Figure out your age to use for the table mentioned below in step 3. If you turn 70½ in the months of January through June, then use age 70 in the next step. If you turn 70½ in the months of July through December, then use age 71 in the next step.

**3.** Take the age from step 2 above and find it in the Uniform Lifetime Table provided by the IRS to get the “factor” which will be used in the formula mentioned below as the denominator. If you have a spouse that will be your sole beneficiary on the IRA and who is more than 10 years younger than you, then use the Joint Life Expectancy Table. If you are inheriting an IRA and trying to calculate the RMD, then use the Single Life Expectancy Table and find the factor corresponding to your age in the year after the account owner’s death.

**4.** Now you have both the numerator and the denominator for the fraction that you will calculate. Divide the numerator by the denominator and this will be your RMD. Make sure that you withdraw this sum of money before December 31st of the year in which you must take the RMD. As mentioned above, if you are 70 ½, you can wait to take it the year after you turn 70 ½ prior to April 1st, but then you will have two RMD’s that same tax year. If you do not withdraw this amount from your IRA’s, you will be penalized with a 50% tax penalty.

**5.** You can take the sum mentioned in step 4 above from one IRA or collectively from several. CAUTION: employer retirement accounts such as a 401(k) or 403(b) must each have their own RMD’s, even if you remove more than needed from your IRA’s.

**Note:** If you do not want to follow these steps, you can ask for help from the custodian of the account and they will give you the amount, but you are responsible for the correct amount if the custodian makes an error. Please feel free to call us if you have any questions or need some help with tax planning.