When Do You Have to Draw Money Out of Your IRA?

by Jane Meggitt Google

    The age at which you must begin taking withdrawals from your individual retirement arrangement depends on the type of IRA. The answer differs if you hold the tax-deferred traditional IRA or the tax-free Roth IRA. In both cases, the minimum age from which you can take distributions without penalty is 59 1/2. If someone leaves you an IRA, the rules are more complicated and depend on the decedent's age.

    Traditional IRAs

    When you begin making withdrawals on your traditional IRA, the amount is taxed as regular income. These contributions were made with pretax dollars, and taxes were deferred on the earnings over the years. You must begin taking distributions from your traditional IRA by the time you reach 70 1/2. Failure to do so results in substantial penalties from the Internal Revenue Service.

    Required Minimum Distributions

    Under IRS rules, you must begin taking out required minimum distributions on traditional IRAs by April 1 of the year after which you turn 70 1/2. Precise distribution amounts vary each year, as the minimum amount is based on the division of the IRA's worth at the end of the year by the IRS' life expectancy factor table. While you can withdraw more than the required minimum distribution, withdrawing less for a particular year results in whopping 50 percent fine by the IRS on the amount not taken.

    Roth IRAs

    Unlike traditional IRAs, Roth IRAs have no mandatory requirement for distributions. You don't ever have to take money out of your account. If you do take money out, it can be done at any time and in any amount once you pass the age of 59 1/2 and the account has been open at least five years. If you keep working past the age of 70 1/2, you can continue to contribute to your Roth IRA. Traditional IRAs prohibit contributions once you reach 70 1/2, even if you are still earning income.

    Inherited IRAs

    If you inherit an IRA from someone other than your spouse, different regulations apply. Whether you inherit a traditional or Roth IRA, you must take distributions. You must set up an inherited IRA account by December 31 of the year of the account owner's death. If the owner died before turning age 70 1/2 and did not take distributions, you must begin taking distributions, no matter what your age, based on the IRS life expectancy table. You also have the option of taking all distributions by the fifth-year anniversary of the original owner's death. If the account owner died after the age of 70 1/2, you no longer have the five-year option and must take distributions based on life expectancy.

    About the Author

    Jane Meggitt has been a writer for more than 20 years. In addition to reporting for a major newspaper chain, she has been published in "Horse News," "Suburban Classic," "Hoof Beats," "Equine Journal" and other publications. She has a Bachelor of Arts in English from New York University and an Associate of Arts from the American Academy of Dramatics Arts, New York City.

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