When you reach 70 ½, the IRS will require that you start taking distributions from your qualified retirement accounts. What are qualified retirement accounts? Any pre-tax retirement account that you’ve been saving in:

  • Profit sharing plans
  • 401k plans (and Roth 401ks!)
  • 403b plans
  • 457 plans
  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs

Getting your RMDs right is a big deal because the penalty for getting it wrong is 50% of the RMD you were supposed to take. Why is the government so anal about this? They want to tax the money you’ve been hoarding away in your pre-tax accounts. So here are some simple rules:

  1. You must take your first RMD in the year you turn 70 ½. Why 70 ½? Don’t ask me, I’m not the government.
  2. You can delay your first RMD until April of the following year, but you will need to take 2 RMDs that year ( the second must be before year end).
  3. Your RMD is calculated based on your life-expectancy using a life-expectancy factor that is available on the IRS’s website.
  4. You must calculate the RMD for each account subject to RMDs, but you can pick which account you want to draw from.
  5. You can delay RMDs from your 401k with your current employer if you are still working, but this only applies to 401ks!
  6. You do not have to take RMDs from Roth IRAs.

Need help with your RMD strategy? I’ll help guide you through the process and make sure you are making the right decision. Give me a call today! 859-291-9879.