You have a decision to make when it comes to taking RMDs from your IRAs. You’re allowed to take them all from one, or one from all.
required minimum distribution
Remember Your RMD
It’s getting close to the end of the year and that means many individuals need to take their required minimum distributions (RMDs). It also means that there will be individuals who must begin taking their required minimum distributions as they will have reached the magic age of 70 ½. For those already taking RMDs, check with your advisor or asset custodian and find out the amount you need to take and how you can receive payments. In most cases, RMDs can be taken in an annual amount, or monthly via check or direct deposit. The specific RMD amount is based on the account balance as of December 31st the previous year and your age. You can use the RMD calculator found here to get an idea of your RMD amount. Additionally, be sure to account for any taxes you might owe. For 401k type plans, 20 percent will be withheld […]
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Remember Your 2016 RMD
It’s hard to believe that 2016 is coming closer to an end. For some individuals that are required to take required minimum distributions (RMDs) from their retirement plans, it may be a good idea to double check to make sure that happens. If it doesn’t the penalties are harsh. According to the IRS the penalty for not taking and RMD or not taking the full RMD is 50% of the amount not withdrawn. This can lead to significant losses to a retiree that must take RMDs. Generally, most financial planners and or custodians we’ll be able to help the individual and remind them that they have and RMD and how much that amount needs to be. If an individual finds themselves in the precarious position of having forgotten to take the RMD or did not take out enough, there is a remedy. The IRS allows an individual to file form […]
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Withdrawals from an IRA – death, disability, and 59 1/2
Three of the most common ways that you can withdraw funds from your IRA without penalty are: 1) reaching age 59½; 2) death; and 3) disability. Below is a brief review of each of these conditions for penalty-free withdrawal: Reaching Age 59½ When you reach age 59½, you can withdraw any amount from your IRA without penalty, for any reason. The only thing you have to remember is that you must pay ordinary income tax on the amount that you withdraw. This means that, once you have reached the date that is 6 months past your 59th birthday, you are free to make withdrawals from your IRA without penalty. You are not required to take distributions at this age (that happens at age 70½). Death Upon your death at any age, the beneficiaries of your account or your estate if you have not named a beneficiary, can take distributions from your IRA in […]
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Age 72 RMD Rules
As an owner of an IRA or other qualified retirement plan (such as a 401k), when you reach age 72 (or 70½ under the pre-2020 rules) you are required to begin taking distributions from the account(s). There are several important factors about these distributions that could trip you up if you’re not careful. Listed below are some of the more important rules – but keep in mind that these RMD rules are only for the original owner of the account, not for a beneficiary of an inherited account. There is a different set of rules for inherited IRA RMDs. Required Minimum Distribution Rules Calculation of RMD – Determine your account balance from the end of the calendar year prior to the year for which the distribution is being calculated. Any additions or withdrawals after December 31 of the previous year are not included in this balance, even if an addition […]
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Charitable Contributions from Your IRA
Once the PATH Act (Protecting Americans Against Tax Hikes) is signed into law, at long last the ability to make a direct contribution from an IRA to a qualified charity will be permanent. For background – a Qualified Charitable Distribution (QCD) is when an individual (age 70 1/2 or older and subject to Required Minimum Distributions from his or her IRA) makes a distribution from his IRA directly to a qualified charity. This distribution can be used to satisfy the Required Minimum Distribution for the year. The distribution is limited to $100,000 for each year per individual. The real advantage of this option is that the owner of the IRA doesn’t have to claim the distribution as taxable income on his or her tax return. Any other distribution of pre-tax dollars typically must be claimed as ordinary income, increasing taxes because of the additional income. In addition, having the increased […]
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SOSEPP – RMD Method
The Required Minimum Distribution method for calculating your Series of Substantially Equal Periodic Payments (under §72(t)(2)(A)(iv)) calculates the specific amount that you must withdraw from your IRA, 401k, or other retirement plan each year, based upon your account balance at the end of the previous year. The balance is then divided by the life expectancy factor from either the Single Life Expectancy table or the Joint Life and Last Survivor Expectancy table, using the age(s) you have reached (or will reach) by the end of the current calendar year. This annual amount will be different each year, since the balance at the end of the previous year will be different, and your age factor will be different as well. Which table you use is based upon your circumstances. If you are single, or married and your spouse is less than 10 years younger than you, you will use the Single Life Expectancy […]
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Forget to Take Your RMD?
In case you forgot to take your required minimum distribution (RMD) for 2014 there’s still hope in order to avoid the 50% (yes, that’s FIFTY percent) penalty of the amount not withdrawn. If you missed taking the RMD for 2014 here’s what you can do. According to the IRS the penalty may be waived if you can establish that it was due to reasonable error that you didn’t take the RMD and that reasonable steps are being taken to remedy the error. That is, take the 2014 RMD right away (or as soon as you can let your custodian know) and it might not be a bad idea to take the RMD for 2015 as well (just to be on the safe side). Once that’s done you or your tax professional need to fill out Form 5329 as well as a letter explaining the reason for not taking the RMD. […]
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An Exception to the RMD Rule
For many folks, attaining age 70 ½ means the beginning of required minimum distributions (RMDs) from their 401k, 403b as well as traditional IRAs. There are however, some individuals that will continue to work because they want to or (unfortunately) have to and still want to save some of their income. At age 70 ½ individuals can no longer make traditional IRA contributions. They are allowed to make contributions to a Roth IRA as long as they still have earned income. Earned income is generally W2 wages or self-employment income. It is not pension income, annuity income or RMD income.
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