Have you reached or are you approaching 70-1/2 years?

When you reach the age of 70-1/2, you are required to begin taking retirement plan distributions.  Failure to do so could subject you to a surcharge by the IRS.  This distribution must be taken by April 1 of the year following the attainment of age 70-1/2. 

These payments are called required minimum distributions (RMDs) and are normally made by the end of the year.  However, the year in which you reach 70-1/2 has a special rule that allows extra time to receive the first distribution.  This special rule is only effective for first-time distributions.  Subsequent distributions must be made by December 31 of each year.  And, yes, this could effectively result in receiving two RMDs in the same year. 

The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2018 RMD, this amount is on the 2017 Form 5498 normally issued to the owner during January 2018.

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Employees who are still working usually can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. If you reach 70-1/2 and are still employed, you should check with your plan administrator for guidance. 

Many answers to questions about RMDs can be found in a special frequently asked questions section at IRS.gov.


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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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