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  Monday November 20, 2017

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WAYS DISTRIBUTIONS CAN BE TAKEN
Learn even more about this topic with the Encyclopedia of Personal Finance™

There are three ways you can take distributions from a traditional IRA.

You can take distributions in the form of interest or dividends. You can have them distributed to you monthly, quarterly, semiannually, or yearly. If you do not want all of your interest and dividends sent to you, you may elect to receive a portion of each and have the rest automatically reinvested into the IRA.

You can elect an option in which you periodically sell assets from your plan. This works for brokerage and mutual fund IRAs. The plan will sell a certain amount of securities every month, quarter, etc. and distribute the proceeds to you.

You can also elect a systematic withdrawal plan made of equal payments. In this plan, called the annuity method, the IRA distributes an equal amount of money to you at least once a year. If it is in a broker or mutual fund plan, the plan may have to sell securities to do this. Your withdrawals may be based upon your current life expectancy, especially if you are older than 70?. There are government life expectancy tables available to help you figure your life expectancy. You may also choose to receive payments based on the joint life expectancy of the IRA owner and beneficiary.

There is a minimum distribution requirement for those older than 70?. This method distributes the amount equal to the balance in your account divided by your current life expectancy. This amount is adjusted each year for your attained age.

The earnings in your IRA accumulate on a tax-deferred basis. You will pay income taxes when you withdraw money?sometimes on the full withdrawal and sometimes on a part of the withdrawal. We'll learn about these situations next.




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