Must I take withdrawals from my retirement annuity as well as from my IRAs when I'm 70 years old? Can I choose how much to withdraw every year? Can I plan ahead for this?


Your required minimum distributions, or RMDs, are determined by an Internal Revenue Service actuarial table. You must start taking them from all your tax-deferred retirement accounts — IRAs, 401(k)s, 457 plans and 403(b) plans (sometimes called Tax-Deferred Annuities) -- no later than April 1 of the year after you turn 70 1/2.

Your annual RMD is the total balance in your accounts on Dec. 31 of the previous year divided by your life expectancy factor, which is listed in IRS Publication 590. For example, let's say your year-end IRA balance is $500,000. At 70, your life expectancy factor is 27.4. Your first annual RMD is therefore $500,000 divided by 27.4 -- $18,248.17.

You must do this annual calculation for the total balance of all your IRAs; you can take the RMD from any one of them. But you must do separate annual calculations for your 403(b), 401(k) and 457 accounts. (This is a good reason to roll all these plans into an IRA when you retire.) If you're receiving payments from an immediate annuity that's inside your IRA, those payments automatically qualify as RMDs — but only for that annuity. You must do a separate calculation for the rest of your IRAs. Annuities held outside retirement accounts aren't subject to RMDs.

To minimize future RMDs, you'd have to shrink your retirement accounts. You can do that by converting some tax-deferred money to a Roth IRA. But that will boost your current taxable income.

Bottom line Tax-deferrals don't last forever. After you turn 70 1/2, you must take yearly taxable distributions from your retirement accounts.

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