We would like to remind retirees about the IRS’s Required Minimum Distributions (RMDs) deadline. RMD refers to the withdrawals you have to make from most retirement plans when you reach 72 years old. The RMD amount is based on the taxpayer’s life expectancy and account balance.
Tax Year 2019 RMD Deadlines
Retirees born before July 1, 1949 should have taken distributions from their retirement plans by December 31, 2019.
Retirees who turned 70-1/2 in 2019 may wait until April 1, 2020 to take their first RMDs. This special deadline only applies for the first year.
You must abide by these distribution rules if you have one of the following retirement accounts:
- Traditional Individual Retirement Arrangements (IRAs
- Traditional Simplified Employee Pension (SEP) IRAs
- Savings Incentive Match Plans for Employees (SIMPLE) IRAs
- Various workplace retirement plans, including 401(k), 403(b) and 457(b) plans
Reporting Your RMD to the IRS
The amount of your RMD must be reported by the IRS trustee or plan administrator to the IRA owner. The amount of the RMD can be calculated by the IRA trustee for the owner and the RMD for each IRA must be calculated separately.
Even though the amounts are calculated separately, the IRA owner or trustee can choose to withdraw the total amount from one or more of the IRAs.
What if I Don’t Want or Need to Take My RMD?
Regardless of the reason, not making an RMD by the appropriate deadline will result in a tax equal to 50% of the difference between the amount you withdrew that year and the amount you were supposed to take out that year. (For example, if you were supposed to take out $5,000 but only took out $2,500, you’ll be taxed 50% of the other $2,500.)
It’s also important to know that you don’t have to take your RMD in one lump sum. You can take it in increments throughout the year so long as the total equals the minimum amount you need to avoid the hefty tax bill.
More Questions About Your RMD?
For more information on RMDs, including frequently asked questions, please visit the IRS.