RETIREMENT PLAN REQUIRED MINIMUM DISTRIBUTIONS

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.

The Required Minimum Distribution (RMD) is calculated based on the value as of the first day of the year. The balance is divided based on your age on the Uniform Lifetime Table.

Other sites:

Investopedia

NY Life RMD Calculator

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s