Do you know the rules regarding required minimum distributions (RMDs)? In USA Today, a reader posed the question; Q: I’m nowhere near retirement, but I was wondering how to find out exactly what my required minimum distributions will be once I do retire.
Robert Powell, editor of Retirement Weekly, answered this question and provided some important information that all individuals should be aware of. First, Powell made it clear that the Required Beginning Date (RBD) for IRAs (including SEP and SIMPLE IRAs) is April 1 of the year following the calendar year in which you reach age 70½. For 401(k), profit-sharing, 403(b) or other defined contribution plans it’s, generally April 1 following the later of the calendar year in which you reach age 70½ or retire. There are different rules for Roth IRA’s and inherited IRA’s.
Calculating your RMD can be tricky, but the IRS provides worksheets on their website that can assist you with this: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Required-Minimum-Distributions-(RMDs).
It is also important to note that there is a severe tax penalty if you fail to take out the required amount by Dec 31st. In the event this occurs, you must pay 50% of what you should have withdrawn.
With all this in mind, Powell urges readers to consult a professional long before age 70 ½ so you can be well prepared and have a comprehensive plan in place.
For more information you can view the USA Today article at: http://www.usatoday.com/story/money/columnist/powell/2015/05/23/powell-retirement-required-minimum-distributions/27192225/?utm_source=feedblitz&utm_medium=FeedBlitzRss&utm_campaign=usatodaycommoney-topstories