RMD Basics No. 2: How to Calculate RMDs
To calculate your RMD, divide your year-end account balance from the previous year by the IRS life-expectancy factor based on your birthday in the current year. For most people, the appropriate factor is found in Table III toward the end of IRS Publication 590-B. Let’s say an IRA owner with an account balance of $750,000 as of December 31, 2018, turns 72 in 2019. The RMD for 2019 will be about $29,297. (Calculate your 2019 RMD right now.)
If you own multiple IRAs, you need to calculate the RMD for each account, but you can take the total RMD from just one IRA or any combination of IRAs. For instance, if you have an IRA that’s smaller than your total RMD, you can empty out the small IRA and take the remainder of the RMD from a larger IRA.
A retiree who still owns 401(k)s at age 70½ is subject to RMDs on those accounts, too. But unlike IRAs, if you own multiple 401(k)s, you must calculate and take each 401(k)’s RMD separately. A retired Roth 401(k) owner is also subject to RMDs from that account at age 70½, though the distributions would be tax-free.
You can take your annual RMD in a lump sum or piecemeal, perhaps in monthly or quarterly payments. Delaying the RMD until year-end, however, gives your money more time to grow tax-deferred. Either way, be sure to withdraw the total amount by the deadline.
