Traditional IRAs (Individual Retirement Arrangements) and other retirement plan contributions can provide a tax benefit annually, allowing you to save regularly for retirement and take distributions when, theoretically, you will be in a lower tax bracket.

Required minimum distributions (RMDs) were established to ensure that such retirement investments don't grow tax-deferred indefinitely. There are basically two situations where you may be required to take RMDs from your retirement plan: Either you have reached the age of 70 1/2 or you have inherited an IRA.

In the year you turn 70 1/2, you are required to start taking annual RMDs from your retirement plans. The calculations are fairly simple and are based on the prior year’s December 31st account balance and your current life expectancy. Most retirement plan custodians will tell you how much you need to withdraw.

Roth IRAs are not subject to this requirement, unless you inherit a Roth IRA.

If you are still working, you may not be required to take RMDs from your current employer's plan, until you retire. Check with your HR department.

Inherited IRAs or other retirement plans: The rules depend on who inherits the IRA or plan.

Spouses are allowed to wait until their age 70 1/2 to start taking RMD's. If they choose to take them sooner, they should refer to the IRS site referenced below.

Non-spouse beneficiaries cannot wait until age 70 1/2 to take distributions. They must start taking distributions based on several factors. Please refer to the rules on the IRS site, linked below.

Making a qualified charitable distribution

There is also a third option. If required to take an RMD, it can distributed it as a donation directly to the charity from the IRA. This option may benefit taxpayers who do not itemize deductions.

Timely distributions and accurate RMD calculations are imperative. Late or insufficient RMDs face a 50% excise tax on required amounts not distributed.

Please refer to the IRS Chart for specific rules for RMD's

The above is considered to be general tax information and is not intended to be used as tax advice. If you believe that any of the above applies to you, please consult with a tax professional. See our Legal Statement.