Understanding RMDs – OLD

Understanding the RMD Rules

The IRS Required Minimum Distribution (RMD) rules can be a bit confusing and failing to satisfy your annual RMD can be expensive, up to a 50% excise tax penalty. The following information is provided to help account holders understand these complicated rules. As every individual’s situation is unique, we always advise contacting a qualified tax advisor to ensure that you satisfy your annual RMD requirements.

Basically, the IRS requires that owners of tax deferred retirement accounts begin withdrawing (and paying taxes on) minimum amounts each year upon attaining the age of 70½. Beneficiaries of Inherited IRAs must usually begin taking RMDs in the year following the year of the account holder’s death (see below). There is an exception for the original account holder of a ROTH IRA; no RMDs need to be taken from a ROTH IRA during the original account holder’s lifetime.

Use the links below for situation specific RMD information.

Traditional IRAs

If you will have turned age 70½ by the end of the current calendar year, you are required to begin taking RMDs this year. Click the link above for more information on determining your first year RMD.

You should have already taken your first RMD by December 31 of last year, unless you elected to defer it until April 1 of this year. In either case, you will need to continue withdrawing your RMDs each year, for as long as your account exists. Click the link above for more information on determining your RMDs for subsequent years.

ROTH IRAs

There are no minimum distribution requirements during the lifetime of the original accountholder of a ROTH IRA. Beneficiaries will be required to begin minimum distributions, see below.

Inherited IRAs (Traditional and ROTH)

Click the following link for additional information for beneficiaries.