Figuring the RMD for an IRA.

[John Schmidt]

Since I'm well beyond 70.5 in age, it looks like I might get hit with a nice penalty because I didn't take enough out of my IRA this past year. I've been trying to find some site that describes how to compute the Required Minimum Distribution(RMD), all I seem to find is jibberish. What gets my goat is if I don't need the funds in a given year, why is the gov't. still forcing me to take it out. I wouldn't get so irritated by it if the "powers that be" were better stewards of what we send them in the first place. I'll need those funds later in life, not now because my retirement plus SS along with my wife's SS is adequate most of the time. Really grinds me. 

[thewoodman]

Hey John, Consider using this link to make your Required Minimum Distribution calculations:

http://www.bankrate.com/finance/money-guides/ira-minimum-distributions-table.aspx

The calculation is based upon what the IRA, 401k, 403b accounts were worth at years end. So, for instance, if your combined retirement accounts totaled $100,000 and you turned 70 1/2 in 2011, you would have to take out $3,650 ($100,000 / 27.4) by Dec. 31, 2012.

If you don't take your RMD, there is a 50% penalty on the amount you didn't take. RMDs are required because the monies, invested into retirement accounts have never been taxed at all and the govt. wants to guarantee that they get their pound of flesh. Sux for sure.

You can reinvest those funds again if you chose, or buy more toys or bling, but the RMD proceeds get added to your taxable income, may bump you into another tax bracket and gets taxed just like ordinary income.