Required minimum distributions, or RMDs, from an IRA are calculated by dividing the year-end value of the IRA by the distribution period determined by the IRS, according to BankRate. RMDs must start being withdrawn no later than April 1 of the year following the year the account holder turns 70 1/2.Continue Reading
Specific strategies for taking RMDs include avoiding two distributions in the same year, taking distributions from the worst-performing account, withdrawing the correct amount and converting to a Roth IRA, according to U.S. News & World Report. To avoid taking two distributions in the same year, the first distribution should be taken before the April 1 deadline because the second distribution comes due by December 31 and could significantly increase one's income tax bill if it puts the account holder in a higher tax bracket.
If an individual has several IRAs, he must take RMDs for each account but can add up the distributions and take them all from the single worst-performing account. WIthdrawing the correct amount is important because withdrawals of less than the RMD are subject to a 50 percent excise tax of the shortfall, according to Investopedia.com. If an individual chooses to convert an IRA to a Roth IRA, no RMDs are required because income taxes have already been paid on Roth IRA contributions, according to U.S. News & World Report.Learn more about Financial Calculations