What are the traditional IRA required minimum distribution rules?


Traditional IRA is subject to annual contribution limits prior to retirement so that the deferred tax is not too much.

For the same reason, once distributions begin, participants in traditional IRAs have to meet certain minimum distribution requirements aimed at helping the federal government collect taxes on the tax-deferred amounts over a reasonable period of time.

Required Minimum Distributions Rules

  • Distributions from a traditional IRA must start no later than 1 April of the year following the calendar year in which the individual attains age 70 ½. For example, if an IRA holder attains age 70 ½ in November 2009, they must receive their first required minimum distribution (RMD) in April, 2010.
  • The traditional IRA holder may choose to receive the funds in a lump sum or in distributed instalments so that a minimum amount is guaranteed every year. Those who choose the minimum amount distribution option must distribute their RMDs by the end of every year.
  • The IRA trustee or the IRS can calculate the required minimum distribution amount and send a reminder to the IRA owner.
  • A 50 percent excise tax is imposed on the excess accumulation if RMD amounts have not been distributed to the IRA holder by the due date, or if distributions are less than the amount required by law. IRA holder can always request waiver of the penalty from the IRS and if approval is granted, the owner gets the amount back.
  • Under some qualified plans, certain IRA holders can be eligible for RMD deferral, i.e. they can have their minimum distributions deferred until they retire, even if they are older than age 70.5.
  • The Internal Revenue Service has developed life expectancy tables for the purposes of determining the minimum required annual distribution.

    Generally speaking, the minimum required distribution payment is based on the life expectancy of the individual or the joint life expectancy of the individual and his or her beneficiary.

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