In The Ultimate Guide to Understanding Retirement Plan RMDs we gave a brief overview of IRAs and RMDs, and explored the world of “Not Roth” IRAs. For those of us who wish to be able to deduct our IRA contributions and avoid income restrictions, any of the half dozen types of IRAs that are regulated by required minimum distributions make up most of our financial planning options.

Remember that if you have any type of IRA other than a Roth of which you are the original owner (inherited Roths count too), you will be required to meet these regulations. We all know that there are big repercussions for not following tax laws, so RMDs can be a little intimidating as you do your financial planning.

Until you break it down, that is. Once the steps are clear, RMD regulations can be kept up with using nothing more than a calculator, calendar reminders, and six simple rules.

1. Pay Attention to Age (Yours & Your Spouse’s)

From our last experience, we know that the IRS has a number of daunting pages, including the page on RMDs. We discussed a few of the IRS charts on RMDs and the different worksheets available to begin the process of calculating your individual distributions.

Set a calendar reminder — or write a note in a paper calendar — for the day you turn 70½. This will be the most important singular date and age for creating your retirement plan. The only exception to this is if you own less than 5% of the entity providing the plan and your plan states that you do not have to begin RMDs until you retire.

Every year, after you turn 70½, the IRS will review your marital status on January 1st (we’d put that date into our calendar annually too!). The IRS worksheet states that, “If your spouse is the beneficiary of your IRA on January 1, he or she remains a beneficiary only for purposes of calculating the required minimum distribution for that IRA even if you get divorced or your spouse dies during the year.” If your spouse is, in fact, the sole beneficiary of your IRA, you just need to remember whether they are more than 10 years younger than you (If you’re the lucky one calculating down to the day, exactly 10 years younger falls into the “everyone else” category).

2. It's Annual - If Nothing Else, Remember December 31st and April 1st!

Memorize. These. Dates. The last day of the calendar year is not only the deadline for most RMD regulations, but it serves as the dividing line for whether your first RMD is due 3 months after the year you turn 70 ends or whether it is due on April 1st of the following year.

If you reach age 70½ before the end of the year of your 70th birthday, your first distribution will be due on April 1st of the following year. If you fall into this category, you are allowed to withdraw your first RMD any day of the year you turn 70½. If you reach age 70½ after the end of the year of your 70th birthday, your first distribution will be due on April 1st of the year after that (1 year and 3 months after the beginning of the year you turn 70½, rather than 3 months).

December 31st is also the end date used for calculating your RMD each year, and the date by which you must have taken your entire required distribution from your IRAs.

3. Withdrawal Whenever & However, But Do It by Dec 31st.

Each year you will need to calculate the individual RMD for each IRA you have, and that distribution is due in full by December 31st. However, you don’t have to take it out all at once. Once RMDs begin, the IRA owner is always able to take whatever amount they would like, so long as the minimum is met by the end of the year. This can also be done in as many or few increments as you prefer.

The IRS notes that “Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).”

Be sure to meet this deadline every year.

4. Does My RMD Aggregate?

Most likely, yes. While you have to calculate each RMD individually, if you have multiple IRAs you can combine the amount you owe and take as much from each of them as you prefer. You can withdraw it all from one, or withdraw any amount that is greater than or equal to your combined required distribution total.

There is one exception to this rule and one exception to it:

If you have more than one IRA that falls under the profit sharing or defined contribution category, you must satisfy the minimum distribution requirements for each defined contribution plan. The only defined contribution plan that is excluded from this category are 403(b) tax-sheltered annuity accounts. Multiple 403(b) accounts may also be aggregated with other 403(b) accounts.

5. There Aren’t Any Good Types of Rollovers

In financial planning in general, it’s best to assume that the good things won’t include a rollover and the bad things will. That is certainly the case with IRAs. If you withdraw more than your RMD for any given year, that balance does not apply to future years’ distribution requirements.

However, if you don’t meet your RMD for a previous year, that does get a rollover into calculations for future RMDs.

6. The Penalty for Messing Up Is Steep!

What happens if you miss an annual distribution? You will mostly be subject to a hefty excise tax of 50% of your RMD total.

To do that, you are required to fill out even more paperwork (Form 5239, to be exact). If you’ve made an error, the IRS reserves the right to excuse you from this tax, but that is a process with quite a bit of fine print. There are a few other exceptions to this, which the IRS details here (these are updated annually, as deadlines approach), but the simple answer is not to do it in the first place.

To avoid that 50% tax, the best thing to do is keep those calendar reminders current!

RMD Calculators Are Your Friend (But They Aren’t All-Powerful)

The process for many retirement savings plans, even if you have more than one, can be done simply with your calculator. Knowing these tips, and working each year’s distribution out on a calculator is the solution for many people. As mentioned in the last of this series, your RMD can be calculated by dividing your IRA balance on December 31st the year prior to reaching the age requirement by the number designated by your age on the IRS’s RMD chart.

If you’ve chosen any of the more flexible but more complicated account types, you should still do these calculations yourself. However, with more complicated plans, it is best to seek the advice of a financial planning professional to review your calculations.