IRA: Required Minimum Distributions
IRA owners may be required to to withdraw funds beginning at age 73, and every year thereafter. Determining your Required Minimum Distribution (RMD) is significant while retaining an IRA, considering both your life expectancy and the IRA's fair market value.
The required amount for each eligible person is based on the December 31 IRA account value of the previous year and the IRA owners date of birth. Your spouse's date of birth may also be a factor if your spouse is at least 10 years younger than you. Interactive Brokers LLC provides several information resources to understand and calculate your RMD, including access to the online FINRA RMD Calculator.
Requesting Your RMD Withdrawal
The Internal Revenue Service (IRS) requires the IRA plan custodian to notify IRA owners about the RMD requirements by January 31 each year. If you turn 73 this year, you are required to begin taking RMDs before April 1 of the following year.
Eligible IRA owners must begin receiving withdrawals by December 31 of the year they reach age 73. The first RMD withdrawal, however, may be delayed until April 1 of the following year.
If you elect to delay the withdrawal, then please observe the following considerations:
(1) Two RMD withdrawals will be required the following year, the undistributed initial RMD and the new RMD.
(2) The new RMD will be slightly larger due to the December 31 market value's inclusion of the undistributed initial RMD.
Subsequent RMD withdrawals from your IRA must be distributed by December 31 to avoid a penalty tax.
Note: Roth IRAs are exempt from the RMD rules during the IRA owner's lifetime.
Requesting Your RMD Withdrawal
You may request a withdrawal of funds through the Transfer & Pay and then Transfer Funds menu options within Client Portal. The IRS deadline for taking RMDs is December 31 each year. Keep in mind that the year end withdrawal cut off for processing withdrawals from your Interactive Brokers account may occur before December 31.
Please note that you can elect to transfer your funds to your bank account or to an Interactive Brokers non-IRA account. To transfer funds to an Interactive Brokers non-IRA account, log into Client Portal, select Transfer & Pay, Transfer Funds then select Transfer Funds Between Accounts.
Your RMD is determined by dividing the account balance on December 31 of last year by your life expectancy factor. Your life expectancy factor is taken from the Life Expectancy Tables contained in IRS Publication 590. Your IRA beneficiary election may play an important role in determining your RMD, as well.
You must calculate your RMD separately for each qualifying IRA custodied at Interactive Brokers and any other financial institution. The RMD, however, may be satisfied from any single one or combination of your IRAs. The IRA Required Minimum Distribution Worksheets may provide additional assistance with the calculation of your RMD.
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Disclaimer: IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax adviser or refer to the U.S. Internal Revenue Service.