When you invest in an IRA, 401(k) or other tax-deferred plan, you make a deal with Uncle Sam: You get years of tax-deferred growth, but you have to start taking money out--and give a cut to the IRS--after you turn age 70½. The calculations can be complicated, and the penalties for missteps are steep: If you don't take the required minimum distribution by the deadline each year, you'll pay a penalty of 50% of the amount you should have withdrawn.

The prospect of taking RMDs and facing the tax bill can be daunting, but there are a number of strategies you can use to minimize taxes, make the most of your investments and avoid costly mistakes.

Calculate the Amount of Your Withdrawals

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Your RMDs are based on the balance in your accounts as of December 31 of the previous year, divided by a. If your spouse is more than 10 years younger than you and is your sole beneficiary, use Table II, the Joint Life and Last Survivor table, for the life expectancy factor.