As I continue to work with families and advise them with their year-end planning I have come across some common questions regarding required distributions from qualified accounts. I’m hoping this information might be helpful if you are nearing retirement or already in retirement and you are projecting your income and taxes for subsequent years.
As most are aware, if you have turned 70 1/2 years of age, you will be required to take a minimum distribution from your IRA. The first year in which you attain the age of 70 ½, you have until April 1st of the following year to actually take the distribution. For all subsequent years, the RMD (required minimum distribution) must be taken before the end of the calendar year (December 31st). The penalty for not taking your RMD for the year is 50% of the amount that was supposed to be taken! The government is serious about collecting their taxes on these accounts before you die!
There are a few nuances that are important to note for those of you who have multiple IRA, 403b and 401k accounts.
• You can add together your IRA RMDs from different accounts and take the total from one IRA.
• You can also add together your 403b RMDs and take the total from one 403b.
• However, for each 401k that you have, you must take your RMD from each account. They cannot be added together.
Enjoy your holidays and call your financial advisor if we can help you with your qualified accounts. It is always best to consult your CPA for clarification of any special circumstances.