How to Calculate an RMD

This is a follow-up to my post last week about required minimum distributions. That post focused on the due dates for taking the RMD each year. This post will focus on the calculation.

Step One

Determine which IRS RMD table you need to use. If the beneficiary of your retirement account is your spouse AND your spouse is more than 10 years younger than you, you the IRS’s “Joint Life and Last Survivor” table, found on Page 96 of the 2013 version of Publication 590.

Everyone else uses the “Uniform Lifetime” table, found on Page 110 of Publication 590.

Since most people fall under the Uniform Lifetime table, we’ll use that in the example in this post.

Step Two

Determine your age for the year of distribution.

Step 3

Look up your age on the table and find your factor.

Step 4

Find your account balance as of the end of the previous calendar year.

Step 5

Divide the account balance by your factor to determine your RMD.

Example

In 2015, you’re 74 years old. Your account balance on December 31, 2014, was $100,000. Your beneficiary is your spouse, who is 2 years younger than you.

You look at the Uniform Lifetime table and find the factor for age 74 and see that the factor is 23.8.

Your RMD is $100,000 / 23.8 = $4,201.68

In almost all situations, your IRA provider (or employer/third-party administrator if it’s a 401(k) plan) will calculate the RMD for you, but it’s useful to know how the number is arrived at.