WAYS DISTRIBUTIONS CAN BE TAKEN
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There are three ways you can take distributions from a
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