Holders of IRA retirement accounts figure required minimum distributions by calculating the account balance on December 31 of the previous year divided by the appropriate life expectancy estimate from a uniform lifetime table, reports the IRS. A number of tables cover account holders, spouses and heirs who are not spouses.
Tax law stipulates that IRA holders must initiate withdrawals from IRA accounts by April 1 of the year after they turn 70 1/2, and they subsequently must make yearly withdrawals by December 31, states Bankrate. The penalty for late or insufficient withdrawal is a 50 percent excise tax on the amount that should have been withdrawn. Although IRA plan administrators may calculate the RMD, responsibility to withdraw the correct amount lies with the account holder, states the IRS. Account holders can withdraw more than the minimum amount, but the excess does not count towards the next year's minimum distribution.
Those who are still working past age 70 1/2 can delay RMDs until they retire unless they are partial or full owners of the business, as reported by the IRS. Spouses who inherit IRAs can take the account as theirs and initiate RMDs according to their own age. Other beneficiaries who inherit IRA accounts must initiate distributions the year after the account holder dies, according to Fox Business.