A holder of Series 7, 65, and 63 securities licenses, Chris DiGregorio has served as senior vice president of investments with Janney Montgomery Scott since 2005. In addition to helping Janney clients prepare for retirement, Chris DiGregorio assists them with post-retirement planning and saving strategies.
While an individual retirement account (IRA) is an important part of planning a comfortable lifestyle after you retire, it's crucial to understand required minimum distributions (RMD) to avoid the possibility of paying a lofty excise tax. By law, you are required to begin withdrawing from an IRA as of April 1 following the year in which you reach 70-and-six-months of age. You can withdraw more than the minimum, but if you fail to make the RMD in that year, you might face a 50 percent excise tax on that amount you were supposed to withdraw.
To calculate how much you are required to withdraw in your first year, divide your IRA's balance as of December 31 the prior year by the distribution period set by Internal Revenue Service (IRS) which, for age 70, is 27.4. For example, if your IRA has $1 million, your first RMD for the year would be $36,496.
