Traditional individual retirement accounts (IRAs) offer savers some attractive tax benefits. One big benefit is that your contributions may be tax deductible. Plus, earnings that accrue in your IRA are not taxed.*

The Taxman Cometh

Like all good things, these tax breaks eventually end. When you withdraw money from your traditional IRA, the portion of the distribution that has not been taxed is taxed as ordinary income. (Penalties may apply to early withdrawals.)

But what if you don’t need to withdraw any money? Too bad, says the IRS. Once you reach a certain age, you must start taking required minimum distributions (RMDs) from your traditional IRA.** If you don’t, there may be a stiff penalty: 50% of the amount you were supposed to take but didn’t.

Your first RMD will be due by April 1 of the year after the year you reach age 70½. Another RMD will be due by December 31 of that same year and each year thereafter.

Calculating RMDs

As a general rule, you can figure your RMD by dividing the amount in your IRA (or the total of all your IRAs) by the appropriate number from an IRS life expectancy table. You can take your RMD from one — or more than one — IRA, depending on what’s best for your financial situation. We can help you decide when the time comes.