How to Calculate IRA Distribution Rate

by Jackie Lohrey

The money you invest in an Individual Retirement Account must eventually come out, whether you want to withdraw it or not. Minimum distribution rules take effect when you reach the age of 70 ½. These required distributions not only provide funds for you to live on but also give the Internal Revenue Service an opportunity to begin collecting income tax on your withdrawals. Calculating an IRA distribution rate starts with a life expectancy chart and follows a set formula.

Calculate the Minimum Distribution Rate

1. Determine the current balance of your IRA investment account from your latest year-end statement.

2. Locate the applicable divisor on the life expectancy table, based on your age as of December 31 of the current year. For example, if you will be 72 years of age on December 31 of the current year, use a divisor of 25.6.

3. Divide the current balance of your IRA investment by this divisor to determine the minimum IRA distribution rate. If your IRA balance is $700,000 and your divisor is 25.6, your IRA distribution rate is $27,343.75: 700,000 / 25.6 = 27343.75

Calculate Additional Amounts

1. Create a paper or electronic spreadsheet with a section that lists your estimated monthly expenses after retirement. Start with major categories such as housing, food, transportation, health care, insurance, personal care, debt such as loans and credit cards, travel/entertainment and a miscellaneous category for other expenses. Then add specifics to each major category.

2. Add another section that identifies each source of monthly post-retirement income. Include sources such as your minimum IRA distribution, Social Security, pension and investment income.

3. Obtain an estimate of your annual federal and state income tax obligations from a tax professional or your financial planner.

4. Calculate your post-retirement income needs and use this amount to determine whether you should increase your minimum IRA distribution rate: Monthly Income – (Monthly Expenses + Tax Obligations) * 12


  • Your minimum IRA distribution rate must be recalculated each year, as the divisor changes annually.


  • Talk to a financial planner before increasing your minimum IRA distribution rate. Increasing the rate at which you withdraw funds can solve problems today, but you may be putting yourself at a disadvantage in the future.

Items you will need

  • IRA year-end account statement
  • IRS life expectancy chart
  • Calculator

Photo Credits

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