3. Calculating Your IRA RMD
The amount you are required to withdraw depends on your life expectancy and the balance of your IRA as of December 31 of the previous year. To calculate your RMD, you divide the year-end balance of your IRA by your life expectancy factor, which is provided by the IRS. The IRS publishes life expectancy tables, which can be found on their website. An example is shown below:
IRA Balance = $100,000
Life Expectancy Factor (age 73) = 26.5
RMD = $100,000 ÷ 26.5 = $3,774
As you can see, your RMD is a fraction of your IRA balance and will increase as you age. If your IRA balance grows, your RMD will also increase, which can significantly impact your tax burden. But don’t worry, there are strategies to manage this burden, which we will cover later in this article.
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