By Sarah Brenner, JD, IRA Analyst, Ed Slott and Company, LLC
Fall is in the air and the holidays are just around the corner. For many retirement account owners, this means that an important deadline is approaching. Most of those who are 70 ½ or older will need to take a 2016 RMD by December 31, 2016. However, that deadline does not apply to everyone. If you are age 70 ½ or over, when would an RMD not be required to be taken from your retirement account by the upcoming December 31 deadline? Here are some exceptions that might apply to you.
What is an RMD?
(required minimum distribution)
Here are 5 steps to calculating your RMD. This is the minimum amount that must be withdrawn from a retirement account each year.
When are you subject to RMDs?
Traditional IRA owners are subject to RMDs beginning in the year in which they turn 70½. Beneficiaries of IRAs and/or Roth IRAs are subject to RMDs beginning in the year after the year of the IRA (or Roth IRA) account owner’s death.
What You Need to Know About Your Required Beginning Date (RBD)
Your Required Beginning Date (RBD) is the date for beginning to take required minimum distributions (RMDs) from your retirement account if you have an IRA or employer plan.
The rules differ depending on the type of retirement account you have or if you are the account owner or the beneficiary.
When should you look for a missed RMD (required minimum distribution)?
RMDs must be taken by IRA owners beginning in the year they turn age 70 ½ and by IRA and non-spouse Roth beneficiaries beginning in the year after the death of the account owner. RMDs not taken are subject to a penalty of 50% of the amount not taken each year.
When should you looked for a missed RMD?
You should look for a missed RMD every year after an account owner turns age 70 ½ and when an IRA or non-spouse Roth beneficiary inherits an IRA. Ask your advisor to double check any calculations to be sure they are correct.
It’s that time of year if you are an IRA owner age 70 ½ or older. You must take your required minimum distribution (RMD) before the end of the year. Not taking your RMD or the correct amount can result in crippling penalties, which is why we cover this topic in great detail at The Slott Report.
Here are three RMD mistakes you must avoid. Remember, it’s not too late to take your RMD, just make sure you do it correctly with the assistance of a competent, educated financial advisor like those who train in this specialized area.