Question from a client:”Kim, pretty soon I will be hitting 70 1/2 and I want to know, do I need to take money out of all of my IRAs or just one?”
My answer is: Congratulations and I hope you are enjoying a great retirement! If you are the owner of a traditional IRA, you must start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70 1/2. April 1 of the year following the year in which you reach age 70 1/2 is referred to as the required beginning date.
In this particular case, you have multiple IRAS. So you basically add up what the total value is as of Dec 2008 (if you are planning on taking the distribution in early 2009) and you look then at your age in Publication 590 Table 3 page 104 of the 2007 pdf file.
A rough PARTIAL copy of one is here for your use – please go check out Pub 590 for the complete table but for the purposes of illustration this will do nicely. (And, you are welcome).
Table III (Uniform Lifetime)
(For Use by: • Unmarried Owners, • Married Owners Whose Spouses Are Not More Than 10 Years Younger, and • Married Owners Whose Spouses Are Not the Sole Beneficiaries of Their IRAs)
Age Distribution Period
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70 27.4
71 26.5
72 25.6
73 24.7
74 23.8
75 22.9
76 22.0
77 21.2
78 20.3
79 19.5
80 18.7
81 17.9
82 17.1
83 16.3
84 15.5
85 14.8
86 14.1
87 13.4
88 12.7
89 12.0
90 11.4
91 10.8
92 10.2
93 9.6
So you take the total of all your IRAs, let us say it is $100,000. Then you look for your age, let us say it is 70 1/2. So you go UP in the table to 71 years and use 26.5 as the distribution period that is related to that table number for our calculation. We take $100,000 / 26.5 = $3773.58 and rounding it up to $3774. That amount should be distributed to you by April 1 2009.
Okay, now most IRA custodians SHOULD be calculating what your RMD (required minimum distributions) should be. They should be sending you statements alerting you that you need to have a disbursement before it is too late. If you have multiple IRAS, add up the amounts and you may take them from one IRA. You may want to roll them all into one IRA to make your life easier. If you are comfortable with different investment accounts, just make sure that you keep track of the disbursements.
Penalties are stiff if you don’t start taking the required amounts out so please consult with your tax professional and whoever is the custodian for your IRAs. It will make your retirement more enjoyable and hopefully, more profitable.
Kim Isaac Greenblatt
Kim Isaac Greenblatt saves the day by calculating required minimum disbursements from IRAS.