The most complete source for calculating the required minimum distribution from an IRA is the Internal Revenue Service, advises Forbes. IRS Publication 590 and its worksheets explain which life expectancy chart is used, how to determine the RMD and when it has to be taken.Continue Reading
Most taxpayers can use one of two RMD divisor tables, explains Forbes. These are the table for a single-owner IRA and the table for an inherited IRA that isn't from a spouse. The RMD is calculated by taking the account balance as of Dec. 31 of the previous year and dividing it by the factor from the applicable table, which is based on the account holder's age.
Other retirement planning websites, such as Kiplinger, provide an automated tool to calculate an RMD. Entering the account owner's age and the account value provides a quick answer. These calculators come with warnings that they don't cover every situation.
An RMD is calculated for each traditional IRA, but the owner of multiple IRAs can choose which accounts to take the distribution from, as long as the total taken is the RMD or more. Failing to correctly calculate and withdraw an RMD when required results in a penalty of 50 percent of the undistributed amount, the IRS warns.Learn more about Financial Planning