IRAs: What’s Your Required Minimum Distribution?

Posted in Community, Products, Retirement
August 20th, 2012 at 12:00 pm by Ally

IRAs can be helpful tools in saving for retirement. But like any account, an IRA comes with rules and restrictions that you should know before you open one.

One of the most important IRA-related rules is the required minimum distribution on traditional IRAs.

The required minimum distribution (or RMD) must be taken by April 1 of the year after the accountholder reaches 70½ years of age. The accountholder must take these distributions by December 31 of each consecutive year, as well as pay income tax on each withdrawal.

The IRS calculates RMDs by using one of three tables that take into consideration several factors, including the retiree’s age, the amount in the account at the end of the previous year, and whether the retiree is the sole account owner.  These tables are all available on the IRS website.As always, it’s best to consult a tax professional when considering how to take the RMD.

U.S. News & World Report lays out some helpful tips related to taking your required minimum distributions:

Remember to do it each year

Failure to withdraw comes with a hefty 50 percent tax on the required withdrawal, on top of the related income tax you already have to pay. So don’t let it slip your mind.

Only do it once a year

Your first withdrawal has to be taken by April 1 of the year after you turn 70½. However, you’ll have to make another withdrawal by December 31 of that year to count for the following one. These two withdrawals may put you in a higher tax bracket for the year, so the IRS allows you to make that first withdrawal by the December 31 of the year you turn 70 ½.

Stagger your withdrawals

Don’t want to make your required withdrawal all at once? You can withdraw multiple times over the course of a year, as long as your RMD adds up to the required amount. However, if you take out more than the required amount, the difference will not count toward future years.

Handling multiple IRAs

An accountholder with multiple IRAs must calculate the RMD for each account. However, the total can be withdrawn from one or several accounts. Some experts suggest taking your RMD from the account with the lowest interest rate.

Roth conversion

Don’t want to deal with taking a RMD? Consider converting your IRA to a Roth IRA. The Roth IRA allows accountholders to make any withdrawals they’d like without penalty after age 59½.


Do you use an IRA to save for retirement? What’s your strategy for taking your required minimum distribution?

Responses to this post (2 comments)

  1. 1/14/2013
    11:25 pm
    Pete Radatz says:

    I’m considering opening a traditional IRA, 5-year, CD with you. I have questions about Ally’s policies on Required Minimum Distributions (RMDs) – I’ll be 70.5 years old at the end of 2013 and so I’ll be faced with my first RMD. I know all the IRS rules about RMDs, and I’ve read, on Ally’s web-page, that there is no penalty for early withdrawal of RMD funds. But I’d like to know Ally’s detailed RMD policies and rules such as:

    1 – Is there a special Ally form to start the RMD process? Can it be done online? Does this have to be done every year?
    2 – I also have IRA CDs at other banks. Will Ally allow me to take all my RMD obligations from the Ally CD?
    3 – What are Ally’s RMD payout options? Yearly? Quarterly?

    If Ally has written rules on RMDs, I’d like to get a copy please. Thanks for your help, Pete.

    • 1/17/2013
      2:57 pm
      Ally says:

      Thanks for your questions Pete. If you would like to call us we are here 24/7 at 1-877-247-ALLY (2559) and an IRA specialist would be happy to answer your questions. Or, if you would like to visit our website, you can find more information on IRAs here: http://www.ally.com/bank/ira/

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