Required Minimum Distributions (RMDs)

Author

Weber Group at Raymond James

Posted on

Dec 17, 2019

Book/Edition

Pennsylvania - Greater Pittsburgh Area

Required Minimum Distributions (RMDs) apply to all qualified retirement plans and IRAs, with the exception of non-inherited Roth IRAs. These accounts allow tax-deferred growth, however the deferral is limited. Eventually, participants or beneficiaries must begin to withdraw the assets, thereby incurring income taxes.
A Required Minimum Distribution is the minimum annual amount that must be withdrawn from a qualified plan or IRA. When the distributions begin and how much must be withdrawn are regulated by the Internal Revenue Service.
RMDS FOR ACCOUNT OWNERS
To determine the required beginning date (RBD) for distributions, first determine the calendar year in which the account owner turns 70.

For example, someone whose birthday is August 15, 1948 would turn 70 in February 2019. Therefore, 2019 would be the first year they are required to take a distribution. The RBD is no later than April 1st of the year following their first distribution year.
For every year after the first distribution year, withdrawals must be taken by December 31st.
An account owners required beginning date can be delayed for a qualified plan if the account owner is still working after the age of 70. Their new required beginning date would be April 1st following the year of retirement.
This delayed RBD does not apply to account owners who are more than 5% owners of the company. Being eligible for a delayed distribution for a qualified plan does not delay IRA distributions.

RMD FORMULA FOR ACCOUNT OWNERS
Account Balance / Life Expectancy Factor = Distribution Amount
After determining when to take an RMD, the next step is to calculate how much must be withdrawn.

The minimum distribution amount is equal to the previous years end-of-year account balance divided by the applicable life expectancy factor.
The Uniform Lifetime Table is used for all account owner RMD calculations.
If your spouse is the account beneficiary and is more than ten years younger than you, you may use the Joint Life and Last Survivor Expectancy Table rather than the Uniform Lifetime Table. This will result in a higher factor and a lower RMD.

Editors Note: This article was submitted by Erin Weber, CFP, Vice President, Investments with Weber Group at Raymond James.

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