The first baby boomers are turning 70 this year. That means they soon will have to take a required minimum distribution from their traditional IRAs and 401(k) plans.
The stakes are high for getting RMDs right. If you don't make the appropriate withdrawals, you may have to pay a 50 percent tax on the amount that was not taken out as required.
The Internal Revenue Service uses a formula to determine the RMD for each tax-deferred retirement account you have, based on your age and account balance. The IRS provides worksheets, and the Financial Industry Regulatory Authority offers a free calculator to figure out your annual RMD.
Many IRA providers, such as Vanguard, Fidelity and T. Rowe Price, will automatically calculate RMDs for account holders and transfer that money to other savings or retirement accounts.