Ways IRA Distributions Can Be TakenYou've faithfully been contributing to your individual retirement account (IRA) for years. Now, how do you get your money out? There are three ways you can take distributions from an IRA.
- You can take distributions in the form of interest or dividends. You can have them distributed to you monthly, quarterly, semi-annually, 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 70½. 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 70½. This requirement 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.
How you elect to receive your IRA distributions will probably be determined by how your IRA fits in to the rest of your retirement income, especially when it comes to taxes.