Let me quote straight from the IRS on what an RMD – Required Minimum Distribution is and when you must take it…
“Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ½, regardless of whether he or she is retired.”
Really – who writes this stuff? It’s really this simple. When you turn 70 ½ you must take a minimum amount from certain retirement accounts each year.
Let me go further and quote the IRS on what types of accounts require RMD…
“The RMD rules apply to all employer sponsored retirement plans, including profit-sharing plan, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. The RMD rules also apply to Roth 401(k) accounts. However, the RMD rules do not apply to Roth IRAs while the owner is alive.”
The IRS instructions also include a link to Publication 560 which helps calculate your RMD. It lists exceptions that may be applicable to you, and also links you to several other publications, forms and charts. It also goes on and explains how and which accounts you could take your RMD from and most importantly the IRS goes into great detail of how they will penalize you with an-up-to 50% tax on any distribution not taken within the stated period.
If this sounds complex, complicated and downright confusing, you’re right! Here’s what I want everyone to do about RMD’s. Meet with your retirement advisor when you are 67-68ish – before the end of the calendar year (for tax purposes). Really – I want you to be meeting with him or her every year to ensure your retirement income is on track! At this juncture you need to develop a strategic plan for taking your RMD when you are 70. This is extremely important to plan for now, as the decisions you and your advisor make will affect you within a couple of years and you might need to make some adjustments to your plan as a result of your RMD.
Listen no-one wants to pay a 50% tax on any of our money! So I urge you to see your advisor soon – set up an hour to review your RMD strategy and ensure that you are covered!
Strategically positioning your retirement assets to ensure that you pay the least amount of taxes required is just good sense. Let us help you make good sense with a complimentary Required Minimum Distribution Review call 770-641-7771.
For details on this and other retirement strategies, tune into “Successful Retirement with Jack Browne” Sunday at 5 pm on News/Talk WSB 95.5 fm and 750 am.
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