Here's how to do it:
1. Gather Required Information:
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IRA Account Balance: This is the fair market value of your traditional IRA or other retirement accounts on December 31st of the previous year. You can find this information on your account statements.
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Your Age: As of January 1st of the current year.
2. Use the IRS Uniform Lifetime Table:
The IRS provides life expectancy factors in a table called the Uniform Lifetime Table. You can find this table on the IRS website https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/UniformLifetimeTable.pdf under Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
3. Locate Your Life Expectancy Factor:
Find the row in the table that corresponds to your age on January 1st of the current year. This number represents your life expectancy factor.
4. Apply the Formula:
Use the following formula to calculate your RMD:
RMD = IRA Account Balance / Life Expectancy Factor
Example:
Let's say:
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Your IRA account balance as of December 31st of the previous year is $100,000.
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You turn 72 years old on January 1st of the current year.
According to the IRS Uniform Lifetime Table, the life expectancy factor for a 72-year-old is 27.4.
Calculation:
RMD = $100,000 / 27.4
RMD = $3,649.64 (round to the nearest penny)
Therefore, your RMD for the year would be approximately $3,649.64.
Important Notes:
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This is a simplified calculation for demonstration purposes. Consult a tax advisor for specific guidance on your situation.
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The RMD calculation may differ slightly for beneficiaries inheriting IRAs.
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You must withdraw your RMD by December 31st of each year to avoid penalties from the IRS.
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There are exceptions to the RMD rules for certain retirement plans, such as Roth IRAs. Make sure to research any exceptions that might apply to you.
I hope this explanation helps!