01Planning for Your Retirement
You can use Vanguard’s RMD Calculator to estimate your future required distributions when you're putting together your retirement income plan.
The calculator will project your RMDs for all future years when you enter your estimated rate of return. This can be very useful when you're tax planning for retirement because larger distributions that come later on might push you into a higher tax bracket.
Keep in mind that it sometimes doesn't make sense to wait until age 70 1/2 to withdraw from your retirement accounts. If your required distributions will be larger, later on, consider a plan where you can withdraw from these accounts at a younger age.
02If You're Over Age 70 Now
You don't want to miss an RMD if you're already age 70 1/2 because a hefty penalty can apply. It's equal to 50 percent of the amount you were supposed to withdraw. Use FINRA's Required Minimum Distribution Calculator to calculate your current year’s RMD.
You'll need last year's year-end account balance on hand because the formula that determines how much you must withdraw is based on your December 31 balance from the previous year.
It also takes into consideration your year-end age in the year of distribution. If you have multiple IRAs held in different institutions, you can add up the total balances and take your RMD from one account. But you might want to consider consolidating your accounts to make this process a bit easier each year.
03Inherited an IRA
You must follow RMD rules when you inherit retirement accounts as well. For example, although Roth IRAs don't have RMDs for the original account owner, you must take an RMD if you inherit one. Use Bankrate's RMD Calculator to calculate these mandatory distributions.
The rules are slightly different than if it were your own account. You'll need the deceased person's age of death as well as the prior year-end account balance.
Then you'll use your age as of the end of the year for the year in which you are calculating the distribution. These RMD rules can be a pain, but they allow you to stretch out inherited accounts and take distributions slowly over your entire life expectancy and this can be a powerful benefit.
The Best RMD Calculators
Find out How Much to Take out of Required Minimum Distribution
You become subject to certain rules regarding required minimum distributions from your retirement accounts when you get older—specifically, when you reach age 70 1/2. These rules also apply if you inherit a retirement account regardless of how old you are at the time. They dictate when you must begin withdrawing money from your retirement savings and in what amounts. They apply to most IRAs, with one exception: Withdrawals are not required from Roth IRAs until after the death of the owner.
These rules might create a bit of a tax snarl as well as other headaches if they catch you off guard, so it's best to be prepared. You can project your future distributions so you'll know about how much you'll have to withdraw each year and plan your retirement accordingly.
RMD calculations vary depending on whether you're taking a current year required distribution or a beneficiary distribution, so you should choose an RMD calculator based on what you want to estimate.