When you reach the age 70½, you may be required to withdraw a percentage of money from your tax-deferred retirement account each year. The amount itself is called a required minimum distribution (RMD). Accounts that are typically affected by RMDs include:
Traditional IRAs
Rollover IRAs
SIMPLE IRAs
SEP IRAs
Most small-business accounts (Keoghs)
Most 401(k) and 403(b) plans
The amount that can be required to distribute is set by the IRS Uniform Lifetime Table, which is illustrated below with instructions on how it works and an example listed by the steps:
If no distribution is taken in any given necessary year then 50% of whatever the RMD was supposed to be will be assessed as a penalty at tax time, so in almost all cases you are far better taking the distribution then you are taking the penalty.
Wondering how RMDs may apply to you? Contact our experts at Strategic Tax & Retirement to learn more.
Strategic Tax and Retirement
2434 Superior Drive NW, Ste 101
Rochester, Mn 55901
507-288-3636
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