What is an RMD and how does it work?

An RMD is a required minimum distribution.  It applies to those who have reached age 70½, at which time they are required to withdraw a minimum amount annually from their traditional IRA each year before December 31.

Failure to take an RMD will result in a penalty; however, there is an exception to the December 31 deadline for those who are required to take an RMD for the first time.  Using this exception will result in a double withdrawal the following year so this action should be considered cautiously unless the RMD was missed in the first year.

The RMD is computed by dividing the value of the IRA by the life expectancy of the taxpayer using IRS tables.

If one has more than one IRA, the amount to be withdrawn may be taken from a combination of IRA accounts or only one of the accounts, as long as the total amount withdrawn is equal to at least the amount of the collective RMD for all accounts.

If help is desired in calculating the RMD or the expected tax to result, please get in touch with one of our CPAs using the CONTACTS information provided.

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Roy & Associates, PC serves clients in western Pennsylvania located predominantly in Westmoreland County, Allegheny County, and Fayette County.

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