Tax-Deferred growth is perhaps the most attractive feature of an IRA. By shielding your investment dollars from taxes, an IRA can help you build more assets for retirement. However, tax deferred doesn’t mean tax avoided. And just to make sure IRAs aren’t misused as tax shelters instead of retirement-savings tools, tax laws require you take an annual Required Minimum Distribution (RMD) from your IRA upon reaching a certain age. Keep in mind, though, that you can take more than the minimum amount from your account without penalty.

Question: At what age must I begin taking RMDs?
Answer: Tax laws require that you begin taking minimum distributions from your IRA no later than April 1 following the calendar year in which your turn 70½. For example, if Alice turned 70 on March 12, 2010, and 70½ six months later on September 12, she must take her first RMD no later than April 1 of the following year – 2011. The April 1 rule is applicable only in the first year in which an RMD must be taken. In subsequent years, the deadline is December 31st.

Most people opt to take their first RMD by December 31st of the year they turn 70½ to avoid making two taxable distributions in the same year. Returning to the above example, if Alice waits until April 1, 2011, to take her first RMD, she will have to take another minimum distribution by December 31, and both will be reported on her 2011 tax return.

Question: How is my RMD calculated?
Answer: Simply divide the adjusted balance of your IRA on December 31 of the previous year by the applicable divisor from the IRS Uniform Lifetime table (see back page). The result is your current RMD for the current year.

If your spouse is the sole beneficiary of your IRA and is more than 10 years younger than you, you may use a separate table that addresses joint life expectancy, which will result in a lower RMD. If this applies to you, please contact your financial advisor for information on how to obtain the Joint and Last Survivor table.

Question: What happens if I don’t take the RMD?
Answer: You will be subject to an additional 50% penalty on the amount you should have withdrawn.
Question: Is it true that my beneficiary designation is a critical factor in calculating my RMD?
Answer: In the past it was, but the IRS issued regulations in early 2001 that greatly simplified the process of calculating RMD’s. Previously, your RMD calculation was based on life expectancies of both you and your primary beneficiary. Now it can be based only on your life expectancy – giving you freedom to base your beneficiary decision on other important considerations.
Question: What if I die before all the money is withdrawn from my IRA?
Answer: Your account will be passed on to your designated beneficiary, who will in turn be required to take distributions based on his or her own life expectancy.

Depending on your beneficiary designation, your IRA investment could have the potential to continue growing tax deferred beyond your lifetime. Consult your financial advisor regarding your specific situation.

Question: How do I determine what age to use when looking at the life-expectancy tables?
Answer: Use the age that you will become on the birthday that takes place this year. For instance, if Joe turns 73 in December, then he will find 73 on the attached table and use the appropriate factor to calculate his RMD – in this case, 24.7. You can also use the online RMD calculator at
IRS Uniform Lifetime Table
Age Applicable Divisor
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
94 9.1
95 8.6
96 8.1
97 7.6
98 7.1
99 6.7