Phillip Cannella Blog: Phil Cannella Explains How RMD’s are Calculated

Phil Cannella – Phillip Cannella Blog: Phil Cannella answers a question often posed by consumers which is how is it determined how much of one’s account is subject to a required minimum distribution (RMD).

Phil Cannella says this is an important question for anyone hitting retirement needs to know for penalties are assessed if one fails to meet the guidelines. The IRS wants its money, the money it has let you grow all these years tax-deferred and it is going to come and get it!

In the words of Phil Cannella: “Uncle Sam uses a longevity chart to predict how long you’ll live, so the RMD is calculated based on your life expectancy according to this chart.  A 70½ year old person is estimated to live another 27.4 years, and for those years or until the person passes on, he or she must withdraw at least 3.65% of their total IRA balance.  Add them up: 401(k) plans, IRAs, all of them – 3.65% of that total must be withdrawn and taxes paid on the withdrawal every year.”

That was quite simple really, again a point Phil Cannella makes about getting educated. A lot of the rules and regulations are simple. Any financial professional worth his salt should be able to make complex situations simple enough for the everyday investor to understand.