Ways IRA Distributions Can Be Taken

(3 of 5)

Ways IRA Distributions Can Be Taken

You’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 73. 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.

You can also use a qualified longevity annuity contract, or QLAC. This is a deferred annuity that is funded with money from your IRA. It lets you defer distributions until a future date of your choosing, up to the day you turn 85, and pays you for the rest of your life. It is thus a type of longevity annuity. Because of the opportunity to postpone receiving distributions until a later date, you can escape required minimum distributions until that date. QLACs have contribution limits of their own; for 2025, that limit is $210,000.

If you are 73 or older

There is a minimum distribution requirement for those 73 or older. 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.