Traditional IRA Distributions

You cannot keep funds in a traditional IRA indefinitely. Eventually, you must
withdraw them. If you do not make any withdrawals, or if you do not withdraw
enough, you may have to pay a 50% excise tax (on excess accumulation) on the
amount not withdrawn as required. You must withdraw the entire balance in your
traditional IRA or start receiving periodic distributions from your IRA by April 1 of
the year following the year in which you reach age 70½. Amounts that must be
distributed during a particular year under the required distribution rules are not
eligible for rollover treatment. For additional information, refer to Publication 590,
Individual Retirement Arrangements. Publication 590 is available for download
or you may request a copy by calling 1-800-829-3676.

If you are the owner of a traditional IRA that is an individual retirement account,
you must figure the minimum amount required to be distributed each year.

Figure your required minimum distribution for each year by dividing the IRA
account balance at the close of business on December 31 of the preceding year by
the applicable life expectancy based on the age at the end of the current tax year. If
you have a non-spouse beneficiary who is more than 10 years younger than you,
the distribution must satisfy the minimum distribution incidental benefit (MDIB). If
this is the case, compare the applicable divisor and the applicable life expectancy
and use the lower number.

Initial distribution for the year you turn 70½ must begin by April 1st of the following
year, and for all other years you have to satisfy the minimum required distribution
by December 31st of each year.

To qualify as a rollover, you must take the rollover contribution by the 60th day
after the day you receive the distribution from your traditional IRA. There is a
special rule for frozen deposits, which may extend the rollover period.

A frozen deposit is any deposit that cannot be withdrawn from a financial institution
because of either of the following reasons.

1) The financial institution is bankrupt or insolvent.

2) The state where the institution is located restricts withdrawals because one or
more financial institutions in the state are (or are about to be) bankrupt or insolvent

You can take (receive) a distribution from a traditional IRA and make a rollover
contribution (of all or part of the amount received) to a traditional IRA, only once in
any 1-year period. The 1-year period begins on the date you receive the IRA
distribution, not on the date you roll it over to another IRA. This rule applies
separately to each traditional IRA you own

You must rollover into a traditional IRA the same property you received from your
traditional IRA. If you withdraw assets from a traditional IRA, you may rollover
part of the withdrawal tax-free into a traditional IRA and keep the rest of it. The
amount you keep will generally be taxable (except for the part that is a return of
nondeductible contributions). If you inherit a traditional IRA from your spouse, you
generally can roll it over into a traditional IRA established for you or you can
choose to make the inherited IRA your own. If you inherit a traditional IRA from
someone other than you spouse, you cannot roll it over or allow it to receive a
rollover contribution

Generally, if you are under age 9½, you must pay a 10% additional tax (often
called a penalty) on the distribution of any assets (money or other property) from
your traditional IRA. Distributions before your are age 59½ are called early
distributions. The additional tax is 10% of the part of the distribution that you have
to include in gross income. It is in addition to any regular income tax on the amount
you have to include in gross income. If you receive a distribution from a traditional
IRA that includes a return of nondeductible contributions, the 10% additional tax
does not apply to the nontaxable part of the distribution. Distributions that are
timely and properly rolled over are not subject to either regular income tax or the
10% additional tax. A distribution which is a return of a traditional IRA contribution
before the due date of the tax return for the tax year of the contribution (including
extensions), is not subject to the 10% additional tax if the distribution meets two
requirements: 1) The contribution was not deducted and, 2) The distribution
includes the original contribution and the income it earned. The income earned on
the returned IRA contribution is taxable and may be subject to the 10% additional
tax. There are several exceptions to the age 59½ rule

You may qualify for an exception if you are in one of the following situations:

1) You have unreimbursed medical expenses that are more than 7.5% of your
adjusted gross income.

2) The distributions are not more than the cost of your medical insurance.

3) You are disabled. You are considered disabled if you can furnish proof that you
cannot do any substantial gainful activity because of your physical or mental
condition. A physician must determine that your condition can be expected to result
in death or to be of long continued and indefinite duration.

4) You are the beneficiary of a deceased IRA owner.

5) You are receiving distributions in the form of an annuity.

6) The distributions are not more than your qualified higher education expenses.

7) You use the distributions to buy, build, or rebuild a first home.

8) The distribution is due to an IRS levy of the IRA.