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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 […]

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 According to the IRS the penalty for not taking and RMD or not taking the full RMD is 50% of the amount not withdrawn.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 […]

Qualified Charitable Distributions for 2016

Individuals needing to take their required minimum distributions (RMD) for 2016 may consider having all or part of their RMD distributed as a Qualified Charitable Contribution (QCD). In order to qualify, the following rules must be met. The individual taking the QCD must be age 70 ½. The maximum allowed QCD is $100,000 per individual, annually. The QCD must come from an IRA. QCDs from 401(k)s, 403(b)s, 457(b)s, SEPs, SIMPLEs are not permitted. An individual may roll over an amount to their IRA and then made the QCD. The QCD is counted toward the individual’s RMD for the tax year. If the RMD was already taken, the QCD cannot be retroactively made. The QCD must be made directly to the charitable organization. Generally, the charity must be a public charity. The Protecting Americans from Tax Hikes (PATH) Act of 2015 made allowing QCDs from IRAs permanent. The tax benefit from […]

RMDs From IRAs

I’ve made the observation before – IRAs are like belly-buttons: just about everyone has one these days, and quite often they have more than one. Wait a second, maybe they’re not quite like belly-buttons after all. Oh well, you get the point – just about everyone has at least one IRA in their various retirement savings plans, and these accounts will eventually be subjected to Required Minimum Distributions (RMDs) when the owner of the account reaches age 70 1/2. So what are RMDs, you might ask? When the IRA was developed, it was determined that there must be a requirement for the account owner to withdraw the funds that have been hidden from taxes over the lifetime of the account, in order for the IRS to begin benefiting by the taxes that are levied against the account withdrawals. A schedule was prepared which approximates the life span of the account owner.  This schedule […]

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.

Special Treatment for an Older Spouse/Beneficiary of an IRA

Note: the situation described in this post was originally brought to my attention by Mr. Barry Picker, of Picker, Weinberg, & Auerback, CPAs, P.C.  Mr. Picker is another of those “rock stars” in the world of retirement plan knowledge, up there with the best of them.  Many thanks to Mr. Picker for sharing his wealth of knowledge. There is a special set of circumstances regarding inherited IRAs that only fits a few cases – but for those cases the rules can work out favorably and it is important to understand how this operates.  The circumstances are that a younger spouse has died and left an IRA to the older, surviving spouse.  In this case, if the decedent-spouse had already begun receiving Required Minimum Distributions (RMDs) from the IRA, the survivor-spouse, if sole beneficiary of the IRA, can make the distribution rules work in his or her favor. In any case, […]

How a Spouse Can Stretch an Inherited IRA

Image by Scott Ableman via Flickr If you or someone you know has inherited an IRA from a spouse, you have several options available to you.  You can leave the IRA where it is and treat the IRA as if the original owner is still alive; you could transfer the IRA to an inherited IRA, properly titled, and begin taking RMDs based upon your own age; or you can transfer the IRA to an IRA titled in your own name and treat the IRA as your own.  Each option has merit, you just need to determine which is best for you. Leave it where it is If you do nothing and leave the IRA in your late spouse’s name, you can delay having to take Required Minimum Distributions (RMDs) until your late spouse would have been 70½ years of age.  If you’re older than your late spouse, this could result […]

Should You Take or Postpone Your First RMD?

In the first year that you’re required to start taking Required Minimum Distributions (RMDs) from your IRAs and other retirement plans, you have a decision to make:  Should you take the RMD during the first year, or should you delay it to the following year? The Rule This decision comes about because of the special rule regarding your first RMD:  In the year that you achieve age 70½, you don’t have to take the first distribution until April 1 of the following year.  For each subsequent year thereafter, you’re required to take your RMD by December 31 of the year… so this first year provides you with the opportunity to plan the income just a bit. Generally it’s a better idea to take the distribution in the first year, with just a few reasons that you might reconsider: if your income is considerably higher in the first year than it […]

IRA Inheritance – Not Taking Timely Distributions

A commenter from my post on splitting an inherited IRA sparked this particular post – his question was “What are the consequences for not re-titling an inherited IRA as F/B/O?”  You can see my response to that specific question at the original article… But that question sparked the idea of discussing what happens when a beneficiary doesn’t act in a timely fashion with regard to taking Required Minimum Distributions from the inherited IRA?  That’s our topic for today. The Inheritance So, let’s say you inherited an IRA from your mother – this was her own IRA that she had contributed to or rolled over funds from a qualified plan at some point, and had designated you as the sole primary beneficiary.  Things get really hectic and confusing after the death of a parent, and sometimes we don’t cover all of the bases properly… and in this example, you didn’t realize […]

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