How to Compute an IRA Minimum Withdrawal

The money in your traditional IRA is tax-deferred, not tax-free. To ensure you eventually pay taxes on it, the Internal Revenue Service requires that you begin taking money from the account at age 70 ½. The minimum yearly withdrawal, which is taxed as income, is based on the amount of money in your IRA, your age and your spouse's age. If you fail to take the minimum distribution, you will pay a significant penalty -- 50 percent of the amount you fail to withdraw.

IRA Owner

If you are single or married to someone less than 10 years younger, or if your spouse is not your sole beneficiary, calculating your minimum yearly withdrawal – or required minimum distribution is fairly straightforward. Add the balances of all your traditional IRA accounts at the end of the previous year and divide this sum by your life expectancy, as shown in Table III of IRS Publication 590, Appendix C (Uniform Life Expectancy), which you can find on the IRS website.

IRA Owner with a Significantly Younger Spouse

If your spouse is more than 10 years younger than you and she is your sole beneficiary, make the same calculation using Table II of the same publication. Find your age in the column on the left side and your spouse's age in the row that runs across the top. The number in the box where your ages intersect is your joint life expectancy. Divide your total traditional IRA holdings by this number to calculate your required minimum distribution.

Spouse Beneficiary

If you are the sole beneficiary of your deceased spouse's traditional IRA, the IRS allows you to be treated as the owner, rather than the beneficiary, of the account, if you choose. In this case, you calculate the minimum distribution based on your age according to Table III of Appendix C. If you are younger than your deceased spouse, claiming the IRA as an owner may allow you to delay taking a required minimum withdrawal, or to take a smaller amount.

Other Beneficiaries

If you inherit a traditional IRA from someone other than a spouse, divide the total value of the inherited IRA account at the end of the previous year by the figure next to your age in Table I of Appendix C (Single Life Expectancy) to find your required minimum distribution. These rules also apply if you decide to be treated as the beneficiary, rather than the owner, of your deceased spouse's IRA. If your spouse died before age 70 1/2 , however, you are not required to begin minimum withdrawals until the year in which he would have reached 70 1/2. Alternatively, the five-year rule allows any beneficiary to take the total sum of the inherited IRA by the end of the fifth year following the owner's death. In this case, you do not need to make minimum withdrawals for each year.

Converting Traditional IRA to a Roth

There is no minimum withdrawal from a Roth IRA because the money in these accounts was taxed prior to deposit. You can roll over funds from a traditional IRA to a Roth by withdrawing the desired amount from the traditional IRA and depositing it into a Roth within 60 days. You will pay tax on the amount you withdraw, but you can avoid tax on any future earnings within the Roth account. If you roll over all of your traditional IRA into a Roth, you must still take the required minimum distribution in the year that you do the rollover, and you may not include this sum in the amount that you transfer to the Roth.

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