What Is the Maximum IRA Distribution?

by John Csiszar ; Updated July 27, 2017

IRAs, or Individual Retirement Accounts, are specialized investment accounts that provide tax benefits to owners. Unlike with regular investment accounts, IRAs must follow specific regulations developed by the Internal Revenue Service in order to avoid fees, penalties and additional taxation. While your age plays a role in when you can begin taking penalty-free withdrawals and when you must begin taking distributions, there are no restrictions on the maximum amount you can take out of your IRA.

Required Minimum Distributions

While the IRS grants IRA accounts with long-term tax benefits, you are not permitted to keep money in your IRA forever. Upon reaching the age of 70 1/2, you must begin taking required minimum distributions, or RMDs, from your IRA. Specifically, you must begin taking distributions by April 1 of the year after you turn 70 1/2. The IRS calculates the minimum amount you must withdraw based on your account value at the end of the previous year, divided by your life expectancy as determined by Appendix C of IRS Publication 590. While you must take out at least this minimum amount, there is no restriction on the maximum amount you can withdraw. If you do not take out at least the minimum amount when required, the IRS assesses a 50 percent "excess accumulations" penalty tax on the amount you neglected to withdraw.

Voluntary Withdrawals

Although IRAs carry various tax benefits and are subject to numerous IRS regulations, they are still essentially investment accounts. At all times, you maintain control over the assets in the account and control their disposition. While certain distributions you take may result in taxes or penalties, you can still withdraw your IRA funds whenever you wish. The only restriction on the maximum amount you can withdraw is the value of the assets in the account.

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Age Restrictions

As an IRA is intended to be a long-term investment account, the IRS exacts penalties on any withdrawals before ages near retirement. Specifically, any IRA distributions you take before you reach the age of 59 1/2 are subject to a 10 percent early withdrawal penalty, in addition to any taxes owed.

Taxation

For most IRAs, any withdrawals you take at any time are taxable as ordinary income. This is true even if the earnings in the account primarily consist of capital gains, such as through the buying and selling of stocks. The primary exception to this rule is in the case of Roth IRAs, where most distributions are tax-free. While there is no maximum limit to the amount you can withdraw from an IRA, the more you take out, the more income you must report on your tax return. If you withdraw a large sum from your IRA, you may place yourself in a higher tax bracket.

About the Author

After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.

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