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Are You 70 or Older? Don't Forget to Take Your RMDs!

Posted Thursday, January 3, 2013 by Michael A. Larson

alt textRequired minimum distributions (RMDs) are the minimum amounts that a retirement plan account owner must withdraw annually, generally beginning in the year that a person turns 70 ½ and for each year thereafter. Failure to make the RMD can result in penalties of 50% of the RMD that was not taken. Taxpayers should be careful to make the required withdrawals on a timely basis.

Who Needs to Take RMDs?

  • Owners of any employer-sponsored retirement accounts such as, profit sharing plans, 401(k) plans, 403(b) plans and 45 (b) plans

  • Owners of traditional IRAs

  • Owners of IRA-based plans such as, SEPs, SARSEPs and SIMPLE IRAs

  • Owners of Roth 401(k)s

When Do I Need to Take an RMD?

For the first year, the RMD can be taken by April 1 of the year following the year in which the account owner turned 70 ½. For all subsequent years, the RMD for that year must be taken by December 31 of the year. If you delay your first RMD until April 1 of the following year, you will be required to take another RMD for the second year by December 31 of that year, resulting in taxation of both RMDs within a single year. Even though you may have started taking account distributions in earlier years, you must still take out the RMD based on the retirement account balance in the prior year.

Except in the case of IRAs and 5% owners of the business sponsoring a retirement plan, minimum distributions may be delayed until after retirement for persons that are still working full-time after age 70 ½ depending on plan provisions.

How Do I Determine the Amount of the RMD?

The amount may be determined by the use of IRS tables in Publication 590. In addition, your IRA custodian or retirement plan administrator will generally be able to assist you in determining the correct amount of the RMD.

For more information, please contact Ronald Bueing at (206) 805-1490.

DISCLAIMER: This blog is not legal advice. This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice under any circumstances, nor should it be construed as creating an attorney-client relationship. The information on this blog is a general statement of the law and may not be up to date, accurate or applicable to your specific circumstances. Prior success in litigation is not an indication of future results; each case is unique and past results cannot predict future outcomes.

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