Required Minimum Distributions (RMDs)
Post date: Mar 22, 2016 5:57:28 PM
HERE'S A MILESTONE YOU DON'T REACH UNTIL YOUR SEVENTIES. The major milestones of older Americans are not attended with the same sense of wonder that accompanies the major milestones of younger Americans. Sure, registering for Social Security benefits and signing up for Medicare are rites of passage, but they don't hold a candle to earning your driver's license, receiving your first kiss or earning your first promotion.
If you have retirement accounts when you become a septuagenarian, then you'll encounter a milestone the Internal Revenue Service (IRS) strongly encourages you to remember. Beginning April 1 of the year following the year in which you reach age 70½, you must begin taking required minimum distributions (RMDs) from most of your retirement accounts. Forbes offered this list:
Traditional IRAs
Rollover IRAs
Inherited IRAs
SEP IRAs
SIMPLE IRAs
401(k), 403(b), and 457(b) plan accounts
Keogh plans
There currently are no RMDs for Roth IRAs, unless the accounts were inherited.
If you have more than one qualifying retirement account, then a separate RMD must be calculated for each account. If you want to withdraw a portion of each account, you can, but it may prove simpler to take the entire amount due from a single account. Once you start, you must take RMDs by December 31 every year. If you don't, you'll owe some hefty penalty taxes.
The IRS offers some instructions for calculating the RMD due. "The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS' "Uniform Lifetime Table." A separate table is used if the sole beneficiary is the owner's spouse who is ten or more years younger than the owner."
If you need help figuring out the correct amount when RMDs are due, contact A.D. Financial Planning.