An individual retirement arrangement is a long-term financial account that can serve you for the rest of your life if it's managed well. To make the money in your IRA last as long as possible, you need to manage your withdrawals wisely. Begin by learning the Internal Revenue Service's mandatory withdrawal rules for regular IRAs and inherited IRAs, the latter of which have their own rules and benefits.
Traditional IRA -- Uniform Lifetime
With any traditional IRA account, you must begin taking withdrawals for the calendar year when you turn age 70 1/2 if you haven't started before that. Your life expectancy according to the IRS defines how much you must withdraw each year. If you are not married, or your spouse is fewer than 10 years younger than you, you use the uniform life expectancy table to determine this amount. Divide your IRA balance at the end of the year by your life expectancy to determine the minimum required withdrawal. For example, if you are 75, using the uniform lifetime table, your life expectancy is 22.9 years. If your IRA balance is $750,000, your minimum withdrawal is $32,752.
Traditional IRA -- Younger Spouse
If your spouse is more than 10 years younger than you and the sole beneficiary of your IRA, the IRS allows you to use a different calculation because your combined life expectancy is longer and you might need to preserve more of your account balance to help care for your spouse in retirement after you die. For example, if you are 75, and your spouse is 50, your combined life expectancy is 34.7 years, making the minimum withdrawal for a $750,000 IRA balance $21,614.
Roth IRA accounts receive the most favorable treatment for any person who wishes to grow the account over the long term and does not need to withdraw funds from the account to pay for living expenses. If you are the account owner and not a beneficiary, a Roth IRA does not have any minimum withdrawal requirement at any time, regardless of your age. You can continue to build your account and pay no taxes on the gains as long as you are alive.
Spousal Inherited IRA
If you inherit an IRA account from your spouse, you are free to retitle the account in your own name and treat the account as your own. This means you can take any required distributions from the account based on your own age and life expectancy and not that of your spouse. The same is true with a Roth account. If you elect to treat the account inherited from your spouse as your own, you do not have to take any mandatory distributions from the account. You should name a new beneficiary of the account to ensure that the tax-advantaged treatment is available to the beneficiary you choose.
Other Inherited IRA
If you inherit an IRA from someone other than your spouse, you can use the account to set up a lifetime source of income, allowing the account to continue to grow tax deferred -- or tax free in the case of a Roth IRA. You can take distributions based on your own life expectancy according to the IRS' single life expectancy table. For example, if you inherit an IRA worth $750,000 at age 25, your life expectancy according to the IRS is 58.2 years. Your minimum withdrawal would be $12,887. The calculation would change each year based on the account balance and your age. The account could continue to grow considerably each year, as the mandatory withdrawals could be considerably less than the investment gains you experience.