It's common knowledge that you must start IRA distributions when 70 and use either of 2 methods to deminish the account-- but-- If you start to withdraw assets shortly after reaching 59 1/2, is there any time frame that the account must be depleted by? I have never read anything about this method although it must be the most commonly used. Heck, I need my money then, not at 70. Thanks in advance, Jim
Jim,One way is to use the IRS Pub 590, Annex E Table "-- Life Expectancy Tables and the Table for Determining Applicable Divisor for MDIB (Minimum Distribution Incidental Benefit). These tables are included to assist you in computing your required minimum distribution amount if you have not taken all your assets from all your traditional IRAs before age 70 1/2."This may be found at http://www.irs.gov/forms_pubs/pubs/p5909901.htm It provides a divisor for determining annual withdrawal either based on a sing or joint life expectancy.Ron W.I'm currently using this method to draw down on my pre-tax IRAs.
for Jim:After reaching age 59.5 and before reaching age 70.5, your IRA withdrawals can be as large or as small as you wish, with each year's withdrawal determined at your own preference and regardless of what you have done in other years. The consequences of these withdrawals are current income taxes, current money to spend, and less left in the tax sheltered account. When you have to start withdrawals, if you select the term-certain method, you have to completely empty the IRA over that term -- currently it is 16 years for a person 70 years old. This might lead to some remarkably high income taxes in the last few years of withdrawal. If, instead you select the recalculation method, there is NO time frame during which the account must be deleted. After you chose a distribution method, you have only established a minimum withdrawal. You can take more. You need not spend what you withdraw, but can invest it in a taxable account. In short, withdrawal rate does not have to be the same is consumption rate. Your heirs may care which withdrawal method you select, but for greatest freedom to chose current withdrawals, you need the recalculation method, which will give you lower minimum required withdrawals and help you avoid outliving your IRA.You said that you need your IRA withdrawals, implying that your other retirement assets wouldn't cover your expenses from the time you retire until age 70. It takes some calculation to determine when and whether you have or will have enough assets to retire and a lot more calculation to determine the best rate of drawing from you taxable and tax-sheltered accounts.I recommend that you check any answers you get on such questions against some authority. My reference for what I've said here is http://www.irs.ustreas.gov/forms_pubs/pubs/p590toc.htm Publication 590. Individual Retirement Arrangements (IRAs), but I may have misunderstood it. Also, I haven't considered here the possibility that your withdrawals will be based on the life-expectancy of TWO people.Chips, happily retired over six years now
You can withdraw funds from an IRA after the the age of 59 1/2 penalty-free, but you still have to pay ordinary income tax in the year of the withdrawal. At 70 1/2 a new set of rules kick in. In that year the Custodian of the IRA will provide you with a form in which you will have to choose one of the three options for manditory withdrawals for future years. The calculation will be based on the valuation of your IRA on DEC 31st of the prior year, you become 79 1/2. You need to discuss the options with your Custodian because once they are made they are irrevokable! There is an excellent series of articles on IRA's being run currently by a TMF, you should take a look at it. - Matthew
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