“No, it means ‘Raisin Made Dates.’”
“Well, that doesn’t make any sense – isn’t a raisin already a date?”
Ever been part of a conversation like that and wanted to burst in with what’s really going on?
Not Armdys, not Raisin Made Dates (I mean really) – RMDs. Required Minimum Distributions.
For those of you lucky to have a retirement account AND be 70 ½ years old, here’s the over/under on RMDs:
- RMDs must typically be taken by December 31 each year; except for the year in which you turn 70 ½.
- When you turn 70 ½, you have until April 1 of the next year.
- The effective deadline for 2019 RMD first-timers is coming up fast. Tuesday, March 31 is the deadline.
To clarify: if you turned 70 ½ in 2019, you must take your Required Minimum Distribution (RMD) by March 31st, 2020.
If your financial advisor has not contacted you via email or regular mail, we recommend you reach out to him/her to ensure your proper RMD has been calculated.
Did you receive a form 5498? Look at Box 11 to see if an RMD is due.
- The RMD rules apply to traditional IRAs, most 401(k)s and other qualified retirement plans. The rules don’t apply to Roths, unless:
- If you are the beneficiary who inherits a Roth IRAs, you must take an RMD
- RMD amounts are based on an IRS formula driven by the account owner’s life expectancy; the RMD is calculated by dividing the year-end account total by the number of years you’re expected to live.
- If you have multiple accounts, you need to calculate the RMD for each IRA separately. But you can aggregate the amounts owed and make the withdrawals from whatever accounts you like.
- If you have other qualified plans – such as 401(k)s – those must be calculated and paid out separately from those accounts.
- If you have an inherited (or beneficiary) account, that RMD must be satisfied separately, too.
- Although most investors take the smallest RMD possible, there’s no limit on how much you can withdraw without penalty after you reach age 59 ½.
- RMDs can be taken in a single lump sum, or through a series of timed distributions throughout the year.
And finally, pay attention to this one because this is a most excellent planning opportunity:
- If you are 70 ½ or older you can satisfy your RMD (required minimum distribution) from IRA retirement accounts by making a qualified charitable distribution (a QCD) directly to the charity from your IRA. (This has the potential to affect how much Social Security is taxed and how much you will pay for Medicare B and D) and presents the opportunity to reduce Federal and State tax liabilities.
We are happy to help with any planning or questions you may have. We cannot help with trying to explain that raisins are not dates, though. You’re on your own.