You can't take it with you, and that definitely pleases the Internal Revenue Service. But the tax collector doesn't want you to leave a lot of your money to heirs, either. This forces senior citizens to dip into their nest eggs each year or pay additional taxes.

In this tax tip: • Why withdraw?   • Determining your distribution   • Withdrawal exceptions   • Other withdrawal rules   • Spending not required

And the IRS wants you to lighten your retirement reserves soon, by April 1, to be exact.

If you turned 70½ last year and haven't started spending what Uncle Sam thinks you should yet, then by April 1 you have to take an IRS-specified amount out of your retirement account, in some cases even if you're still working.

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.

It's no secret why the IRS wants you to start drawing down these accounts. Your money sat in the account for years, tantalizingly out of reach of the IRS as it accrued tax-deferred earnings.

A new pension law enacted last fall could provide a way to meet your required minimum distribution amount and avoid paying taxes on it by transferring it directly to an eligible charity. But regardless of whether you or your favorite charity gets the money, it still must come out of your account.

Why withdraw?
You don't care what the rules are. You don't need the money; you don't want to pay taxes on any withdrawals and you're leaving your account untouched. Not a good idea.

Failure to withdraw triggers an excess accumulation tax. This levy is 50 percent of the required distribution that you didn't take. For example, you didn't withdraw the required $1,000 from your traditional IRA. The tax charge for your defiance is $500. For a taxpayer in the 25-percent income tax bracket, that's twice what you would have paid in taxes if you'd simply followed the RMD rule.

If you can convince the IRS that your distribution shortfall was due to "reasonable error" and that you're taking steps to rectify the situation, the agency could waive the penalty. In that 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.

Determining your distribution
OK, you've accepted that you must start siphoning off your retirement fund. Now it's important to find out just how much money you have to withdraw.

The IRS has created three tables based on life expectancies to figure the minimum withdrawal amount, which is a percentage of your IRA based on your age.

Retirement-plan beneficiaries can use the first table that is found in Appendix C of IRS Publication 590.

Married account owners with spouses more than 10 years younger can use the second table found in Publication 590. Because its calculations incorporate the younger age of the spouse to spread withdrawals over a longer life expectancy, these account owners don't have to take out as much.