Anyone age 70 1/2 years old or older is required to take distributions from retirement plans. Retirement plans include Individual Retirement Accounts (IRA), profit sharing plans, 401(k) plans, 403(b) plans as well as SEP-IRA’s, Simple-IRA’s, SAR-SEP’s and Keogh Plans.
Roth IRA’s are not subject to the RMD rules.
Do not assume that your bank or investment broker will automatically distribute the required minimum distribution. If you forget to take the required minimum distribution or not enough of a distribution a 50% penalty may be charged.
In the year that a person becomes 70 1/2 years old, the person has a choice to postpone the distribution to April 1, of the next year. If the particpant in the plan postpones the prior years payment he or she will have to take 2 minimum distributions in the year you turn 71.
When deciding whether to postpone from one year to the next, it is important and should be determined on a case by case basis. If your tax bracket is higher in the year you become 71 versus the year you are 70 1/2, you may save more money by taking the distribution in the year you turn 70 1/2.