Have You Taken Your Required Distribution for 2018?

November 30, 2018

Person using calculator

If you're at least age 70½ and own a traditional, SEP or SIMPLE IRA, you're required to take distributions from these accounts each year. Failure to do so could result in a tax bill plus a 50% penalty on the portion you should have removed from the account.

So it's important to remember this required minimum distribution, or RMD. But how much should you take? In most cases, you can use the Uniform Lifetime Table as part of the calculation to determine your RMD. There are a few exceptions, though, so you'll want to check with your financial advisor before making any withdrawals.

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You must take your first distribution by April 1 of the year after you turn 70½. Then you must take your second distribution by Dec. 31 of that same year. You'll take all future RMDs by Dec. 31 of subsequent years.

As an example, let's say Margaret was born on Jan. 1, 1942, and her IRA was worth $200,000 on Dec. 31, 2017. To determine her 2018 distribution, Margaret uses the Uniform Lifetime table to find the factor for a 76-year-old, which is 22.0. When she divides the account balance by this factor, she finds that her RMD is $9,090.91.

It is important to remember that this is only a "minimum" distribution – you can always take a larger amount. Your financial advisor can partner with you to determine how your RMD fits into your retirement income strategy.

Important Information:

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. Please consult your estate-planning attorney or qualified tax advisor regarding your situation.

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