By J.J. Montanaro

The year is quickly winding down. For millions of Americans, that means the window for taking annual required minimum distributions (RMDs) from IRAs and other retirement plans is closing. And if the conversations I have on a regular basis are any indication, the rules surrounding these remain a mystery to many, despite Congress’ simplification in 2002.

Retirement plans such as 401(k)s, 403(b)s, the Thrift Savings Plan and IRAs are designed to encourage folks to save for retirement by providing a tax incentive in the form of income-reducing contributions and/or tax-sheltered accumulation. In other words, you’re able to hold the IRS at bay and build your nest egg by participating in these types of plans. But the IRS is intent on getting its share, and the RMD rules ensure it by requiring you to begin removing money from these plans – and paying the appropriate taxes – beginning at age 70½. Here’s what to know as you prepare for the IRS onslaught:

You must take your first distribution in the year you turn 70½. However, the first distribution – and only the first – can be delayed until April 1 of the year after you turn 70½.

For example, say you turn 70 on Nov. 15, 2013, and will be 70½ on May 15, 2014. Your first distribution is required to be taken by Dec. 31, 2014. So you could take it at any point in 2014 or delay it until April 1, 2015. If you choose the latter, you will have to take two distributions that year since all distributions after the first one must be taken before Dec. 31.

The “minimum” is just that. While the IRS has a robust set of rules regarding the minimum amount you must withdraw, you are entitled to take all you want from your retirement savings. IRS Publication 590 provides Table III, Uniform Lifetime, to help you determine how much you must withdraw. This table works for everyone except those married to a spouse who is more than 10 years younger and is the sole beneficiary of the plan. There’s a separate table for those cases.

Simply take the prior year’s Dec. 31 value of your retirement account and divide it by the IRS-provided factor to determine how much must be withdrawn. You can take as much as you want from your IRA plans, but don’t take too little. The IRS levies a 50-percent tax on any required amount not withdrawn.

Multiple plans require multiple calculations. You must calculate your RMD from each IRA or employer plan separately, but you can withdraw it from one or more than one of the accounts – as long as they’re of the same type. For example, if you have three IRAs, you could calculate the RMD for each but withdraw the total required amount from one.

Can’t do it for your spouse. 
In many cases, the IRS considers things like income, deductions and exemptions to be a team game for married couples. Not so with RMDs, which must come from the account owner’s funds.

Hopefully, this helps you better understand some of the nuances surrounding RMDs as you head out to meet with your tax adviser.

J.J. Montanaro is a certified financial planner for USAA, The American Legion’s preferred provider of financial services. Submit questions for him online.

This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.USAA means United Services Automobile Association and its insurance, banking, investment and other companies. Banks Member FDIC. Investments provided by USAA Investment Management Company and USAA Financial Advisors Inc., both registered broker dealers. USAA Financial Planning Services® refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner TM in the United States, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.