Don't Forget Your Required Minimum Distribution

Don’t Forget Your Required Minimum Distribution

by | Oct 25, 2018

If you are 70.5 years or older and have either an IRA, SEP IRA, SIMPLE IRA, or 401(k) account, you need to withdraw your minimum distribution before the end of the year.

Beginning when you turn 70.5 years old, IRS regulations generally require you to withdraw a minimum amount of money each year from any tax-deferred retirement accounts. If you don’t take enough money out of your accounts, you may have to pay a 50% penalty on the amount not taken.

Understanding when and how to take your required minimum distribution is critical to ensuring you avoid future penalties and stay on the right side of your disbursements.
 

How Much Should You Take?

The amount you need to take for your required minimum distribution is determined by your age, account balance, and your life expectancy. The IRS publishes life expectancy tables that are used in the calculations.

If you have a spousal beneficiary who is more than 10 years younger than you and is the only beneficiary for the entire distribution year, you can base your RMD on your joint life expectancy.

If you are unsure how much you need to take, or how to get the money out of your accounts, you should speak with your financial planner or plan administrator right away.
 

2018 RMD Deadline

For IRAs, the RMD deadline is December 31st each year. While this year the 31st falls on a Monday, waiting until the last possible moment to withdraw funds is not the best idea. Try and get your minimum distribution withdrawn before Christmas, if possible.

For your first distribution (and only your first), you get a three month extension until April 1st of the following year. The same generally holds true for 401(k) plans and other qualified retirement plans. However, if you wait until after December 31st to take your RMD, you will have to take two RMDs in one year, which could affect your income tax bracket or Medicare eligibility.

If you are over 70½ and still working, you can generally delay your RMDs from your 401(k) until after you retire.

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Would you like to speak with a financial planner about your specific needs? If so, we'd love to hear from you! You can book a free phone consultation with us right now by clicking "Schedule An Appointment".

Once you've picked an available day and time, and provided your contact information, your appointment will be booked. If you have any questions, or need to change your appointment, please call us at (707) 595-8702. We look forward to speaking with you.

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