After you turn 72, federal tax law generally requires you to withdraw a minimum amount from your retirement savings plans each year. These withdrawals are called mandatory minimum distributions (RMDs). An RMD is usually calculated for each account, including a Gold IRA, by dividing that IRA account or retirement plan's previous balance as of December 31 by a life expectancy factor that the IRS publishes in the tables in publication 590-B, Individual Retirement Arrangement (IRA) Distributions. The amount of your RMD is calculated by dividing the value of your traditional IRA by a life expectancy factor, as determined by the IRS. To calculate your RMD, start by listing the fair market value of your IRAs as of December 31 of the previous year.
Retirement plan participants and IRA account owners, including owners of IRA SEP and IRA SIMPLE, are responsible for withdrawing the correct amount of RMD on time each year from their accounts, and face severe penalties for not accepting RMDs. You must calculate your RMD for each IRA separately, but you have the flexibility to deduct your full RMD amount from a single IRA or from a combination of IRAs. While you can't reinvest the RMD in a tax-advantaged retirement account, you can keep it in a deposit account or reinvest it in a taxable brokerage account. Tax breaks If you've been saving money in a 401 (k) or IRA for years, you could be in for an unpleasant surprise when it's time to withdraw money from those accounts.
However, reducing the balance of a traditional IRA reduces your future RMDs, and the money from the Roth IRA can stay in place as long as you want. Mandatory Minimum Distributions (RMD) You have saved a lot of money in tax-deferred retirement accounts and expect to transfer much of that wealth to your loved ones. If you can't lower your RMD, you may be able to lower your RMD tax bill, that is, if you have made and maintained a record of non-deductible contributions to your traditional IRA. If you are married to someone who is more than 10 years younger, divide your account balance at the end of the year by the IRS life expectancy factor at the intersection of your age and the age of your spouse in Table II of IRS publication 590-B (opens in a new tab).
However, keep in mind that your retirement will be taxed as ordinary income and that any excess you incur will not count toward the amount of RMD for future years. For example, while traditional IRA distributions count when calculating Social Security benefit taxes and Medicare premium surcharges for high-income taxpayers, Roth IRA distributions don't. The RMD rules also apply to traditional IRAs and IRA-based plans, such as SEP, SARSEP and SIMPLE IRAs. The amount is determined based on the fair market value of your IRAs at the end of the previous year, taking into account your age and life expectancy.