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RMD Calculators to figure your Required Minimum Distribution

A person working on a calculator

  |  By Taylor Close

While many Americans are getting their financial documents ready for Tax Day, another financial deadline is approaching even sooner. Certain investors who own a traditional, SIMPLE or SEP IRA and turned 70½ in 2015 must take a required minimum distribution, or RMD, by April 1.

Starting at age 70½, account owners are required to remove a portion of assets from their IRAs each year as a distribution. Your first RMD must be taken by April 1st of the year following the year in which you turn 70½. For all subsequent years, required minimum distributions must be taken by Dec. 31st. (In most cases, RMDs only apply to traditional IRAs, not their Roth IRA counterparts.)

But how can you calculate your RMD? At a high level, the required minimum distribution is based on the account holder's age, the IRA's previous year account balance, and a "withdrawal factor" that is primarily based on life expectancy.

When it comes to calculating actual numbers, there are numerous RMD calculators online that can help you determine your distribution.

  • FINRA, the Financial Industry Regulatory Authority, has an RMD calculator available on its website.  This RMD calculator can help you determine your current year RMD.
  • Bankrate.com also has an RMD calculator on its site to help you determine how much to withdrawal.

Keep in mind that there are many nuances associated with distributions that can affect RMD calculations. For instance, Dana Anspach, About.com’s MoneyOver55.com expert, explains in a blog post that if you’ve inherited an IRA, RMD rules are slightly different than if you were the account owner. She recommends investors in this situation use Bankrate’s RMD calculator to calculate mandatory distributions.

It’s also important for investors to be aware that while the institution(s) where you hold your account(s) can calculate your RMD, institutions can't see all the IRAs you may hold in other places. That means it is ultimately your responsibility to determine the total RMD amount for all of your accounts.

If you hold a traditional, SIMPLE or SEP IRA, RMDs should be included as part of your overall tax planning and options are available that can allow you to meet the IRS regulations without compromising your investment strategy. Some self-directed IRA investors who hold illiquid assets, such as single-family homes, choose to do so in a Roth IRA to avoid the need to take RMDs. It’s always best to work with a financial advisor to ensure you are meeting your minimum distribution requirements while also meeting your retirement investment goals.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.

PENSCO Trust Company performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as selecting any professional to assist them with an investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. Other than the Opus Affiliates, PENSCO is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.