If you don't take your IRA distribution on time, it's expensive. The penalty is 50% of the withdrawal you should have taken.
IRS wants you to take IRA distributions on time so they can get their hands on the tax dollars. Not until you take a withdrawal does IRS get to tax this money you have been putting away for decades. Your first withdrawal is required by April 1 after you turn age 70 1/2. But its a good idea to take your first distribution in the year you turn age 70 1/2 or else the following year, you need to take 2 distributions (one for turning age 70 1/2 and the next one for turning age 71). Having to take two distributions in one year could push some people into a higher tax bracket.
Some people need to take distributions prior to age 70 1/2. if you inherited an IRA, you must start taking distributions the very next year, regardless of your age.
It is best not to depend on anyone to remind you or be responsible for this (such as depending on an accountant or financial advisor). Make a note in your annual calendar to take your distribution. Even if you have it set up automatically with your custodian, check with them ahead of time that they have the distribution scheduled in their records.
This withdrawal, known as a required minimum distribution, or RMD, must come out of retirement savings where taxes have been deferred. This includes several popular IRAs, such as traditional; simplified employee pension, or SEP; and SIMPLE accounts -- as well as certain employer-sponsored plans. You can however lump accounts of the same type together. So if you have 3 IRAs that total 100,000, you can calculate your IRA distribution based on the $100,000 and then withdraw that required amount from any of the IRA accounts you desire.
IRS is somewhat lenient if you miss your IRA distribution for good cause. If you can convince the IRS that your forgotten distribution was due to "reasonable error" and that you're taking steps to rectify the situation, the agency could waive the penalty. A responsible error could be an illness that incapacitated you or you had filed the proper form but your custodian messed up. In such a case, file Form 5329 (part VIII), go ahead and pay the excess accumulation tax and attach a letter of explanation. If the IRS agrees that you shouldn't be penalized, it will refund the excess tax.
If you have just one retirement account, the custodian will normally send you a form and do the calculation for you and send a check. But if you have more than one account, you need your accountant or financial advisor to calculate what to withdraw or you can do it yourself.
Note that IRS provides three IRA distribution tables with the numbers you need. These are in the back of publication 590 (free at www.irs.gov). One table is for everyone (the uniform table) unless
a. you have a spouse more than 10 years younger than you
b. you are the beneficiary of an IRA (an inherited IRA)
There is a separate table for the people who qualify for a or b above.