Mandatory Withdrawals

You must begin taking distributions from an IRA no later than April 1st of the year following the year in which you reach age 70-1/2, or the year in which you retire, whichever is later. For any year after your 70-1/2 year, you must take the minimum distribution by December 31^st of that year. There's an exception to this rule for Roth IRAs, which carry no mandatory distribution requirements.

For years, the rules for computing the amount of mandatory distributions have been criticized for being too complex and restrictive. In response, the IRS, on January 17, 2001, issued new, simpler rules for computing the minimum amount that must be distributed. Although the new rules are optional in 2001 and not mandatory until 2001, the IRS is encouraging retirees to use the new rules immediately, even though you are free to use the old rules. There is an exception, however. Qualified retirement plans must be amended before the new rules can be used.

The penalty for taking too small a distribution is a 50 percent excise tax on the amount not withdrawn as required. You can always take more than the required amount (assuming you're over age 59-1/2) but the extra withdrawals don't count towards your minimums for future years.

If you use the old rules to calculate the minimum required distribution, you take the total balance in all IRA accounts as of December 31, 2000, plus your contributions made for 2001. Divide this balance by one of the following life expectancies: your remaining life expectancy, or the remaining joint life expectancy of yourself and your oldest beneficiary. Life expectancy tables can be found in IRS Publication 590, Individual Retirement Arrangements (IRAs). In the first year you take a minimum distribution, you must decide whether, for each subsequent year, you're going to simply subtract one year from the life expectancy you used last year, or recompute your remaining expectancy based on the tables. Once you pick a method, you must stick with it unless the terms of your IRA account (i.e., the rules set up by the financial institution) provide otherwise.

In contrast, the new rules call for one simple and uniform table to be used by most participants to determine the required minimum distributions. The new table provides a uniform distribution for all participants who are the same age. The table assumes that each participant has a beneficiary who is exactly 10 years younger. Thus, a retiree determines the required annual distribution by:

• locating his or her current age on the table to obtain the distribution period, and
• dividing that number into the account balance as of the end of the previous year.

By using the uniform distribution period table, most participants will be able to determine their required minimum distribution for each year based on just their current age and the account balance as of the end of the prior year. Beginning in 2002, IRA trustees will be required to provide account holders with a statement of their year-end account balances.

Uniform Distribution Period Table for Determining Required Lifetime Minimum Distributions
Age of Individual	Number of Payout/Distribution Years
70	26.2
71	25.3
72	24.4
73	23.5
74	22.7
75	21.8
76	20.9
77	20.1
78	19.2
79	18.4
80	17.6
81	16.8
82	16.0
83	15.3
84	14.5
85	13.8
86	13.1
87	12.4
88	11.8
89	11.1
90	10.5
91	9.9
92	9.4
93	8.8
94	8.3
95	7.8
96	7.3
97	6.9
98	6.5
99	6.1
100	5.7
101	5.3
102	5.0
103	4.7
104	4.4
105	4.1
106	3.8
107	3.6
108	3.3
109	3.1
110	2.8
111	2.6
112	2.4
113	2.2
114	2.0
115 and older	1.8