How to Calculate IRA Accounts

Download IRS Publication 590. Choose your life expectancy divisor from the applicable life expectancy chart (there are three to choose from).

Obtain your year-end IRA statements for all your non-Roth accounts dated from the previous calendar year you turned 70 ½. Keep in mind that you are required to calculate your RMD for each non-Roth account. Remember that you cannot use the summation of all your year-end balances to determine your RMD.

Divide your year-end balances by your life expectancy divisor to ascertain your RMD. Once you have calculated your RMD for all your non-Roth accounts, you may take the summation of all your RMDs from one IRA account if you choose.

Take your first RMD no later than April 1. Be aware however, that you are required to take your second distribution by no later than December 31 of that year as well. All subsequent distributions must be taken by December 31 of each calendar year.

Double-check your calculations to avoid the 50 percent penalty on missed or miscalculated RMDs. If you run into this situation, you must report it to the IRS on Form 5329 and file it with your tax return. Submit a letter with Form 5329 explaining to the IRS how or why you missed your mandatory distribution. The IRS may reverse the penalty if the reason was justifiable and you plan to take immediate action to correct the problem.

Talk to your tax adviser if unsure of how your RMD will affect you tax-wise. Your taxes could go up, especially if you are holding off until your tax-filing deadline to take your first distribution. Consider putting away a portion of your RMD to cover your tax expenses if your taxes will be increasing from the distribution. Remember, foregoing RMDs is not an option. If you don't need the RMD for retirement, discuss with your tax adviser about converting your non-Roth assets as an estate planning strategy.