If you are turning 70½ this year, you will be required to begin taking payouts from your Individual Retirement Arrangement (IRA). These payouts are known as Required Minimum Distributions (RMDs) and are calculated by dividing the prior year December 31 st balance of the IRA by a life expectancy factor printed in IRS Publication 590.
Your first distribution may be delayed until April 1st of the year following the year in which you turn 70½. For example, if you turned 70½ during 2011, you may delay your first distribution until April 1st of 2012. However, keep in mind that if you do defer the first payment, you will be required to take two distributions in 2012 (2011 & 2012’s RMDs). Doing so means you will be taxed in 2012 on two payouts which could push your income into a higher tax bracket if you are not careful.
Give us a call if you or someone you know could use our assistance in calculating and planning for their RMDs.