If you have an account in a qualified retirement plan, you need to understand that one day you will be forced to take withdrawals from your account whether you want to or not. For
Required Minimum Distributions, as already stated, apply to
So what is RMD? As the name implies, it is a minimum amount that an account holder must withdraw on an annual basis. The first such withdrawal must be made in the year in which the account holder reached age 70 ½. For the very first withdrawal, the deadline for the withdrawal is actually April 1st of the next year, but from that point forward, the withdrawals must be made by December 31st each year.
The amount of the withdrawal will vary each year. To determine the minimum withdrawal, you start with the account balance as of the prior year-end. You then find a divisor by referring to the appropriate life expectancy chart from the IRS and using the factor based on your age at year-end.
Age | Distribution Period | Age | Distribution Period |
70 | 27.4 | 93 | 9.6 |
71 | 26.5 | 94 | 9.1 |
72 | 25.6 | 95 | 8.6 |
73 | 24.7 | 96 | 8.1 |
74 | 23.8 | 97 | 7.6 |
75 | 22.9 | 98 | 7.1 |
76 | 22.0 | 99 | 6.7 |
77 | 21.2 | 100 | 6.3 |
78 | 20.3 | 101 | 5.9 |
79 | 19.5 | 102 | 5.5 |
80 | 18.7 | 103 | 5.2 |
81 | 17.9 | 104 | 4.9 |
82 | 17.1 | 105 | 4.5 |
83 | 16.3 | 106 | 4.2 |
84 | 15.5 | 107 | 3.9 |
85 | 14.8 | 108 | 3.7 |
86 | 14.1 | 109 | 3.4 |
87 | 13.4 | 110 | 3.1 |
88 | 12.7 | 111 | 2.9 |
89 | 12.0 | 112 | 2.6 |
90 | 11.4 | 113 | 2.4 |
91 | 10.8 | 114 | 2.1 |
92 | 10.2 | 115+ | 1.9 |
Source: www.irs.gov/publications/p590b/index.html#en_US_2014_publink1000231236
For example, let’s consider the fictitious case of James Buchanan. Let’s assume James has been taking RMDs and will now turn 74 in 2015. His IRA account balance as of December 31,
That’s a quick review of the basics, but there is more to the issue. We won’t go into the complicated details here, but there are exceptions when RMD can be postponed past 70 ½. Also, the penalty for not taking an RMD is severe – a 50% tax on the required withdrawal.
In part two of this blog we’ll continue the discussion of RMD and in
If we at Kemp Harvest Financial Group can help you in any way with regard to your Required Minimum Distributions or other financial planning needs, please feel free to contact us.
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