Calculating your required minimum distribution takes one formula and one IRS table. This guide walks you through each step so you get the number right.
The RMD formula, step by step
Step one: find your retirement account balance as of December 31 of the prior year. Step two: identify your age at the end of the current year. Step three: look up the matching factor in the IRS Uniform Lifetime Table, the standard table for most account owners. Step four: divide your balance by that factor. The result is your RMD. For example, $300,000 divided by the age-73 factor of 26.5 equals about $11,321. Repeat this for each account type subject to RMDs, since IRAs and employer plans are handled differently.
Which IRS table should you use?
Most people use the Uniform Lifetime Table. There are two exceptions. If your only beneficiary is a spouse more than 10 years younger than you, use the Joint Life and Last Survivor Table, which gives a larger factor and a smaller RMD. If you inherited the account, use the Single Life Expectancy Table. Using the wrong table is a common error that can leave you under-withdrawn and exposed to the 25% penalty, so confirm which table applies to your situation before you finalize the number.
Double-check before you withdraw
Because an under-withdrawal triggers a steep IRS penalty, verify your calculation with your plan custodian or tax advisor before the December 31 deadline. And remember the income side: your RMD raises your taxable income and can lift your Medicare premiums. Call 1-800-MEDIGAP (dial 1-800-633-4427) to learn how your withdrawal interacts with your Medicare costs.