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The Truth About Cutting Your Investment and Retirement Taxes: The Essential Truths in 20 Minutes by S. Kay Bell

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TRUTH 7Required minimum distributions

Uncle Sam provided you some tax breaks over the years to help you build your retirement savings, so you shouldn’t be surprised that he also has a plan in place to get his cut of your nest egg.

By April 1 of the year after you turn 70½, the tax code requires, in most cases, that you begin taking distributions from your tax-deferred retirement accounts. The IRS even tells you exactly how much you must withdraw.

These annual amounts are known as required minimum distributions, or RMDs, and are calculated by dividing your retirement’s account’s prior year-end value by a life expectancy factor in one of three RMD tables created by the IRS. Your precise minimum distribution will change each year as your age increases ...

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