Most divisors are looked up in tables based on your age. Others are calculated based on last year’s divisor. Some particularly unfortunate cases have distribution deadlines rather than divisors at all.
There is a tangled web of rules and options. For any given family situation and set of desires, there is a best answer when it comes to meeting your wishes, minimizing the tax owed, and optimizing your estate plan.
The tax penalty for failing to take an RMD is steep at 50% of the amount you fail to take, so it is essential that you make the effort to take your RMD, even when having illiquid investments creates extra hassle.
If you are a mixed-decade couple, take advantage of the Joint divisor by making your spouse your primary and sole beneficiary for your IRA and use the Joint Life and Last Survivor Expectancy Table to find your RMD.
Although legally fine, this strategy often causes you to accidentally increase your spending every year and decrease your savings. Don’t let the IRS rules about IRA withdrawals tempt you into spending money you had planned to save.
Although a number of tax breaks got snuffed out by the recent tax compromise passed on January 1, the ability to make charitable contributions from IRA accounts for people older than 70 1/2 was given new life.
The tax code provision that allowed IRA owners to contribute up to $100,000 directly from their IRA to the qualified charity of their choice–without recognizing the donation as income–expired at the end of 2011, but what if it is reinstated?
This article from Donald Jay Korn for Investor’s Business Daily describes the benefits of advance tax planning to reduce the tax bite that is inevitable as you grow older and required minimum distributions (RMDs) become a larger portion of your retirement account.