A Traditional IRA requires you to take a distribution after you turn 70 ½. This is called a Required Minimum Distribution, often referred to as an RMD.
Your RMD is calculated by dividing the amount in your IRA as of December 31st of the previous year by your life expectancy (as estimated by the IRS). So, if your account value as of 12/31 is $100,000 and your life expectancy is 16 years, your RMD will be approximately $6,250. (Remember: this is a Required Minimum Distribution – you can withdraw more than your RMD, but will be subject to taxation). Your total RMD does not have to be withdrawn in one transaction. You can withdraw smaller amounts throughout the year; the sum of those withdrawals just need to meet or surpass the amount of your RMD.
The deadline for taking your RMD is December 31st every year. The one exception is if you turned 70 ½ this year and will be taking your RMD for the very first time. In this situation, you have until April 1st of the following year to take your RMD. Note that this will count as your RMD for the current year – you will still have to take another RMD for next year.
Keep that in mind if you are approaching 70 ½ and will need to take an RMD in the near future. Required Minimum Distributions from a Traditional IRA are taxable income; taking two in one year may affect your taxes, so plan accordingly.
If you fail to take your RMD, you will have to pay a tax penalty equal to half of what you should have withdrawn.