Congress created Individual Retirement Accounts (IRAs) to encourage people to save for their own retirement, and to help provide income for them when they do retire. Many retirees set up their IRAs to withdraw monthly income. If you reach retirement age and are fortunate enough to have an IRA to withdraw from, you should plan your distributions carefully, as you will have to pay income taxes on amounts you withdraw from your IRA. Even if you don't need the income, after age 70.5, you are required to withdraw at least a minimum amount, known as a "required minimum distribution," from your IRA.
Plan your investments. If you intend to receive monthly income from your IRA account, and you do not wish to deplete your capital, you should invest in securities that generate income, such as bonds or stocks that pay dividends. While you can sell other securities to make your withdrawals, you will be diminishing your account value. An income-generating security can remain in the account while you simply withdraw the income.
Implement an automatic withdrawal program. Your IRA trustee or custodian will be able to set up a plan that sends you monthly checks out of your IRA, or transfers the funds automatically to your bank (or other) account. You will have to sign an IRA distribution form to initiate the program. Usually, you can set up a program that distributes either the income generated in the account, or a flat, specified sum. Bear in mind that if you withdraw a fixed amount monthly and your account doesn't generate enough income to cover it, you may be forced to liquidate some of your principal.
File your taxes properly. At the end of the year, your IRA custodian will issue you a 1099-R, which outlines the amount you withdrew from your IRA over the course of the year. Verify that this income matches your own records, as it is reported directly to the IRS. When you file your federal income taxes, you will have to enter the total of all of your IRA distributions for the year on line 15 of your Form 1040. Usually, the entire amount will be taxable.
If you set up a monthly distribution schedule from your IRA, make sure that your total distribution for the year exceeds your required minimum distribution (RMD). Failure to do so can result in severe tax penalties.