Required Distributions Q&A

Joseph F. Lagowski

Physician's Money Digest, June30 2004, Volume 11, Issue 12

For many physicians, the assets inIRAs and other retirement plansrepresent a lifetime of savings.While it would be nice to letthese funds continue to benefit from compounding,there comes a time when you'llhave to begin taking distributions. At age70 1/2, you must begin taking mandatoryannual withdrawals from your retirementaccounts and paying taxes on portions ofthe money withdrawn. How you handlethis process can greatly affect your qualityof life in retirement.

Following are some answers to commonlyasked questions about mandatoryretirement distributions:

Q: When do I have to start takingdistributions from my IRAs or qualifiedretirement plans, such as a 401(k)?

A: Your first required minimum distributiongenerally must be taken byApril 1 of the year following the one inwhich you turn age 70 1/2. For example,if your birthday is March 1, 1934, youwill turn age 70 1/2 on September 1,2004. Therefore, you must take yourfirst mandatory withdrawal by April 1,2005, and you must take at least onepayment from these plans by December31 of each year thereafter (including2005 in this example). If you wait untilApril 1 of the year after you turn age70 1/2, you must take two distributions inone year, which could push you into ahigher tax bracket. So, you may want toconsider taking that first distribution bythe end of the year in which you turn age70 1/2, rather than waiting until April 1the following year.

Q: How do I know how much I haveto withdraw?

A: Most likely, your IRA custodianwill compute this figure for you, but simplyput, your minimum distribution iscalculated based on your age and currentretirement account balance. Using apreestablished life expectancy table, thefunds in your account are divided by afactor based on your age and the age ofyour spouse, if your spouse is more than10 years younger than you.

Q: If I withdraw more than therequired minimum amount one year, canI withdraw less than the minimum in asubsequent year?

A: No. Regardless of the amount youwithdraw in any given year, you muststill withdraw the required minimumamount each year.

If you're approaching the time tobegin taking distributions from yourretirement plan, make sure that you talkwith your financial consultant aboutavailable options. Also speak with yourtax advisor to see if you can benefit fromany tax reduction strategies, like a RothIRA conversion, if you are eligible.

Joseph F. Lagowski is vice president,investments, and a financialconsultant with AG Edwards inHillsborough, NJ. He welcomesquestions or comments at 800-288-0901 or This article was provided by AGEdwards & Sons, Inc, member SIPC.