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Distributions - req. minimums


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Five Important Ages for Retirement Planning
"At age 50, your employees will become eligible to save more the standard amount in their 401(k) and IRA accounts ... By waiting until the age of 59-1/2 to take a withdrawal, your employees will get to keep an additional 10% of their money.... Your employees will be able to sign up for Medicare during a seven-month period starting three months prior to their 65th birthday.... Baby boomers born between 1943 and 1954 will be eligible to begin claiming the full Social Security benefit they've earned at age 66.... Whether it's needed or not, they'll be required to take distributions from their traditional IRAs, traditional 401(k)s and Roth 401(k)s after age 70-1/2." (Voya)
Rules for Calculating Required Minimum Distributions
"In reality, retirees who are actually using their retirement accounts for retirement spending may well be withdrawing more than enough to satisfy their RMD obligations anyway. However, given the substantial penalties involved for failing to take the full amount of an RMD -- a 50% excise tax for any RMD shortfall -- it is crucial to ensure that the RMD is calculated correctly (and withdrawn in a timely manner)!" (Nerd's Eye View)
Better Budgeting with the IRS RMD Table?
"[W]hile the IRS RMD [strategic withdrawal plan (SWP) may be a tad simpler than the Actuarial Approach, ... the more exact actuarial calculations is definitely worthwhile and can improve retirement outcomes even more.... [1] The IRS RMD SWP is quite conservative; [2] SWPs frequently do not coordinate well with other sources of retirement income; [3] SWPs generally do not adequately recognize non-recurring expenses in retirement and do not anticipate different rates of increase in future recurring expenses; [4] SWPs generally don't permit 'budget shaping' to meet individual retirement goals, and [5] SWPs generally don't do a particularly good job of helping you with pre-retirement planning." (Ken Steiner, FSA Retired)
An 'Exception' That Can Delay RMDs from 401(k)s
"The still-working exception does not apply to IRAs. It also doesn't apply to employer plans if an employee isn't currently working for that company.... The IRS has no official position on what exactly constitutes staying on the job. Presumably, an individual could work one hour a year and still be considered employed for this exception to the RMD rules to work.... If the worker owns more than 5% of the company the year he or she turns 70-1/2, he or she will never be able to use the still-working exception.... [F]amily aggregation rules apply in determining the percentage of ownership." (Ed Slott, via Financial Planning)
[Discussion] Treat Required Minimum Distribution as a Qualified Charitable Distribution?
"A 401(k) participant wants to treat her RMD for the year as a qualified charitable distribution. She is eligible for an in-service distribution, so since these rules apply only to IRA's we could transfer her money to an IRA first and she could make the charitable distribution from there. However, isn't the RMD required before the rollover to the IRA? Is there any way around this hiccup?" (BenefitsLink Message Boards)
Key Rules for Non-Spouse Beneficiaries
"It is very important to check the terms of the agreement that governs the inherited retirement account to determine if the beneficiary is subject to the five-year rule or the life expectancy rule. In some cases, the beneficiary might be required to make an election by certain deadlines in order to be subject to the rule that he wants to use." (Appleby Retirement Dictionary)
Is Your Retirement Plan Overlooking Required Beginning Dates? (PDF)
"Each retirement plan document defines [required beginning date (RBD)], and is not required to adopt [the] broad regulatory definition.... A plan designed to permit the delay of RBD for non-5% owners (until retirement after age 70-1/2) will find there are non-5% owner participants who work beyond age 70-1/2 that anticipated starting RMDs at age 70-1/2 to supplement their income.... Therefore, a plan designed to delay RBD should include an in-service distribution provision to allow the plan to calculate what a participant's RMD would have been and distribute it when requested, but as an in-service distribution rather than an RMD." (William Grossman, via PenChecks)
So You're the New Owner of an Existing Inherited IRA
"The IRS has some complicated rules for titling inherited IRAs when there are successor beneficiaries.... The RMD calculation cannot be reset when a successor beneficiary inherits an inherited IRA.... A beneficiary can combine inherited IRA accounts that are inherited from the same individual as long as the RMDs are calculated using the same life expectancy factor." (Slott Report)
Six Things to Know About the Year-End Account Balance Used for RMDs
"[I]f you are calculating [a required minimum distribution (RMD)] for 2017 you would use the 2016 year-end account balance. If you are calculating a missed RMD for 2014, you would use the 2013 year-end account balance.... As usual with retirement distribution rules, there are some exceptions to the general rule.... Rollovers or transfers ... Recharacterizations ... Excess QLAC contributions ... Prior-year RMDs ... Still-working exception to RMDs." (Slott Report)
[Opinion] It's Harder Than You Think to Spend Down Your 401(k) Account in Retirement
"[P]eople seem to have a psychological attachment to their pile; they have spent a lifetime building it up and may be reluctant to draw it down. Second, people are fearful about end-of-life health care needs and want to be sure they have enough money to cover their expenses. Finally, people seem to have a desire to leave a bequest ... So, without some guidance, chances are high that retirees will deprive themselves of necessities. One way to help may be to put more emphasis on the Required Minimum Distributions[.]" (Alicia Munnell, in MarketWatch)
Interesting Use of the QCD Strategy: Making Up Missed RMDs
"The tax code and regulations simply say that a QCD can satisfy [a Required Minimum Distribution (RMD) requirement]. They do not specify that it can only satisfy the current year's RMD. And, if you miss an RMD the rules are that it gets added to the next year's RMD." (Slott Report)
[Opinion] Should the Required Minimum Distribution Age Be Raised?
"The oldest of the 75 million baby boomers in the U.S. turned 70-1/2 on July 1, 2016, which means they must take their first required withdrawal ... by April 1 of this year. That represents the start of a lot of money being pulled out of retirement accounts over the next few decades. Couple that with higher life-expectancy rates, and many have started to wonder if the age for those required minimum distributions, or RMDs, should be raised -- or even eliminated[.]" (MarketWatch)
How Skillful RMD Planning Can Sustain Retirement Portfolios
"[T]he mathematics of the RMD virtually guarantee that a portfolio cannot be liquidated within 45 years. The required minimum withdrawal may be inadequate to meet the needs of the retiree in the later years, but that is a different matter. On the other hand, the stipulated RMD may be more than the retiree needs to spend that year, so the excess above their needs can be reinvested into a taxable investment account -- or simply stuffed in a mattress!" (Financial Planning)
[Guidance Overview] IRS Reminds Taxpayers of April 1 Deadline to Take Required Retirement Plan Distributions
"[The IRS] reminded taxpayers who turned age 70-1/2 during 2016 that, in most cases, they must start receiving required minimum distributions (RMDs) from [IRAs] and workplace retirement plans by Saturday, April 1, 2017. The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. It also typically applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans." (Internal Revenue Service [IRS])
Planning to Keep Your 401(k)? Be Careful When You Reach Age 70-1/2
"With IRAs, RMDs must be calculated separately for each account, but the amounts can then be added together and distributed by any one of the IRAs.... In the case of an employer-sponsored plan such as a 401(k), the RMD must be calculated separately and distributed separately from each plan.... Employer-sponsored Roth accounts are subject to RMDs.... If you're still contributing to your employer-sponsored plan, you may be able to delay taking RMDs." (Vanguard)
IRA Annuities: Beware of Death Benefit Taxation
"When an immediate annuity is purchased inside an IRA, the contract and the account step out of the regular minimum distribution rules ... Instead, the IRA becomes subject to the special separate RMD regime that applies to defined benefit pension plans and 'annuitized' defined contribution plans." (Morningstar Advisor)
Business Group Seeks End to Required Minimum Distributions from 401(k) Plans
"The U.S. Chamber of Commerce will be urging Congress this year to end minimum payout requirements from 401(k)s and IRAs ... The effort, along with an effort to spur multiple employer retirement plans, is part of a legislative roadmap for retirement benefits the chamber will roll out February 3 ... [T]he roadmap will be based on a retirement policy white paper prepared for President-elect Donald Trump's transition team." (Financial Advisor)
[Opinion] Comments of American Benefits Council on Draft of the Retirement Improvements and Savings Enhancements (RISE) Act
10 pages. "[A]n employer would be permitted to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to 'qualified student loan repayments,' which are broadly defined as repayments of any indebtedness incurred by the employee solely to pay qualified higher education expenses of the employee (emphasis added) (expenses of a dependent would not be covered).... We applaud the innovation ... [Another] proposal would eliminate the ability of many plan and IRA beneficiaries to receive benefits over a period longer than five years.... [This] will in many instances reduce retirement savings for beneficiaries." (American Benefits Council)
RMDs When You Move Money from an Employer Plan to an IRA
"There are only three instances when you have to adjust an IRA balance before calculating an RMD. [1] Outstanding rollovers or transfers ... [2] Roth recharacterizations done the year after the conversion ... [3] Return of an excess QLAC contribution." (Slott Report)
Who Doesn't Need to Take a 2016 RMD by December 31?
"You just reached 70-1/2 in 2016.... You are 'still-working' ... You have 'old money' ... You have invested in a QLAC.... You have a Roth IRA." (Slott Report)
As You Approach 70, Tips Like These Can Help Trim Your Required Minimum Distributions
"[1] Move some of your IRA funds into a Roth IRA.... [2] Purchase a deferred income annuity known as a [QLAC].... [3] Maximize withdrawals from your IRA prior to age 70-1/2 to the level of peak earnings allowable within your tax bracket.... [4] Consider withdrawing even more money from IRAs for living expenses and leisure pursuits.... [5] Make tax-free donations ... of up to $100,000 directly from your IRA to a charity, sent by your custodian." (MarketWatch)
Tricks and Traps Involving Required Minimum Distributions
"Generally, an individual's RMD is determined by dividing the adjusted market value of their IRA or employer sponsored retirement account as of December 31 of the prior year by an applicable life expectancy factor taken from the Uniform Lifetime Table. There are special rules for participants in traditional retirement plans and those whose spouses are more than 10 years younger." (Harvey M. Katz, Fox Rothschild LLP)
SEC Provides Free Online Financial Planning Tools
Tools at the SEC's Investor.gov web site include: 401(k) and IRA Minimum Distribution Calculator; Compound Interest Calculator and Savings Goal Calculator; Social Security Retirement Estimator; Retirement Ballpark Estimator; Mutual Fund Analyzer; 529 Expense Analyzer; and a link to a searchable database of investment advisers who have filed Form ADV. (U.S. Securities and Exchange Commission)
[Guidance Overview] IRS Finds Charity Is Exception to 'Contingent Right', Making Trust a 'Qualified Beneficiary'
"When there are multiple beneficiaries of a trust, the beneficiary with the shortest life expectancy is used for purposes of calculating RMDs. Only a primary or contingent beneficiary is considered ... In [a recent Private Letter Ruling], the IRS determined that [the named] charitable organizations fall under that exception, because they could become beneficiaries only if all the other beneficiaries in the other classes died before the assets were fully distributed. As such, the charitable organizations ... are 'mere successor beneficiaries'[.]" (Appleby Retirement Dictionary)
[Guidance Overview] DOL Commences Retirement Plan Audits for Compliance with Section 401(a)(9)
"Recently, the [DOL] has begun an expansion of its audit initiative directed at large defined benefit and defined contribution retirement plans, examining plans that the DOL suspects have not made reasonable attempts to locate terminated vested participants who have reached their 'required beginning dates' under Internal Revenue Code Section 401(a)(9). This initiative draws attention to the importance of maintaining updated records regarding retirement plan participants and the consequences of not doing so under both the Code and [ERISA]." (Dickinson Wright PLLC)
[Official Guidance] Text of PLR 201628006: Required Minimum Distribution Rules Apply to Designated Beneficiary Despite State Court's Post-Mortem Reformation (PDF)
"After Decedent's death, the trustees of the trusts petitioned the Court for a declaratory judgment that would modify the beneficiary designation for IRA X to carry out the original estate plan. Based on its finding of Decedent's intent, the Court ordered that the beneficiaries of IRA X are Trust C as a 50% beneficiary and Trusts D an d E as 25% beneficiaries, consistent with Decedent's prior beneficiary designation. The order was retroactively effective as if such designation were made on the date Decedent signed the beneficiary designation form for IRA X.... [A]lthough the Court order changed the beneficiary of IRA X under State law, the order cannot create a 'designated beneficiary' for purposes of section 401(a)(9)." (Internal Revenue Service [IRS])
Understanding the Nuances of Your ESOP Plan Language: Forced or Involuntary Distributions
"Many plan sponsors do not realize that retired participants can also be forced out of the ESOP if they do not elect to receive a distribution when eligible. This is true regardless of their account balance and regardless of the plan document language. This provision is found in IRC 411(a)(11). Though many plan documents do not state this directly, it may be inferred[.]" (Principal Financial Group)
These Roth Accounts Have Required Minimum Distributions
"Designated Roth accounts, or DRAs for short, are Roth accounts held inside an employer-sponsored retirement plan, like a Roth 401(k) or Roth 403(b).... Although Roth IRAs have no RMDs during your lifetime, designated Roth accounts are subject to RMDs.... Roth IRAs have no RMDs during your lifetime, but if there is any money left in your Roth IRA when you die, your heirs -- other than (possibly) your spouse -- will have to take RMDs from the inherited Roth IRA." (Slott Report)
RMD Dilemma: Death in the Age 70-1/2 Year
"One of the most confusing situations in the complex world of required minimum distributions (RMDs) is what happens when an individual dies on or after Jan. 1 of the year in which he or she turns 70-1/2 but before his or her actual 'required beginning date.' " (Morningstar)
Required Minimum Distributions: FINRA Answers Ten Common Questions About IRA Accounts
"[1] What are required minimum distributions? ... [2] How do I calculate the RMD? ... [3] What if I don't take any distributions, or if the distributions I take do not meet the RMD amount? ... [4] Can I withdraw more than the minimum required amount? ... [5] If I do take more than the minimum amount, can a distribution in excess of the RMD for one year be applied to the RMD for a future year? ... [6] Can I just take the RMD from one account instead of separately from each account? ... [7] What happens if a retirement plan account owner or IRA owner dies before RMDs have begun? ... [8] Do I have to take an RMD if I own an annuity? ... [9] What reporting obligations does my brokerage firm have with respect to RMDs? ... [10] What if a mistake is made?" (Financial Industry Regulatory Authority [FINRA])
Affluent Households and the Retirement Tax Cliff
"Leveraging the unused space within an individual's top tax bracket may provide an opportunity to take a proactive distribution from a retirement account and convert those funds to a Roth IRA.... For affluent and high net worth (HNW) households, the major building blocks that could make a successful Roth conversion strategy include the individual's top marginal tax bracket, time before RMDs begin and having the right mix of account types. Among the risks to consider: longevity, portfolio returns and legacy concerns." (J.P. Morgan Asset Management)
An Employee Benefits Expert Navigates Her First RMD
"In honor of turning age 70-1/2 this year, I am calculating my first required minimum distribution (RMD). This turns out to be more complicated than I expected. I have nine IRAs. Which ones do and do not require me to take a distribution for this year? What is the prior year-end balance I'm supposed to divide my 'applicable distribution period' into? I'm beginning to have more sympathy for the clients." (Natalie Choate, in Morningstar Advisor)
How Are IRA Annuity RMDs Calculated After Life Annuitization?
"There is some debate over whether or not such a distribution from an annuitized annuity can be used to satisfy RMDs for other IRAs in the year of annuitization. On the one hand, once annuitized, IRA annuities generally follow defined benefit plan rules instead of the defined contribution rules. That would lead you to believe the answer is no. On the other hand, RMDs are based on prior year-end balances. Since the annuitized annuity had a prior year-end balance and wasn't annuitized at the time, that might lead you to believe yes[.]" (Slott Report)
Missed Your 2015 RMD? Keep Calm and Take These Three Steps
"The IRS can waive the 50% penalty for good cause.... [To] have the penalty waived. [1] Take the RMD.... You must take the RMD amount that was not taken in 2015. [2] File the 2015 IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.... [3] Attach a letter of explanation to Form 5329." (Slott Report)
Why Retirees Need To Stop Writing Checks To Charities
"[The qualified charitable contribution] can actually represent a valuable tax strategy for many retirees.... The charitable contribution generally -- but not always -- results in a charitable tax deduction. Individuals who do not itemize their deductions ... do not benefit from the charitable contribution. In addition, charitable deductions are limited to a percentage of the adjusted gross income ... When an IRA owner takes a distribution from the IRA and then later makes a charitable contribution, the distribution counts in the calculation of adjusted gross income (AGI). If a QCD is elected, the distribution is excluded from income and it does not count as part of AGI." (Forbes)
Eight Things to Know About a Special Spousal Rule That Allows Smaller RMDs
"If your spouse is your sole beneficiary for 2015 and is more than 10 years younger than you, you may use the Joint Life Expectancy Table to calculate your RMD for 2015, instead of the Uniform Lifetime Table.... If you have more than one primary beneficiary listed on your IRA, you must use the Uniform Table and not the Joint Life Expectancy Table.... If you change beneficiaries during the year, you may not use the Joint Life Expectancy Table.... Your IRA custodian ... is permitted to use the Uniform Lifetime Table for all reporting of RMDs to IRA owners. Be aware that an amount reported to you may, therefore, be more than your actual 2015 RMD." (Slott Report)
[Guidance Overview] IRS Employee Plans News No. 2015-14, Dec. 21, 2015
Topics: [1] 2015 Cumulative List explains the changes in plan qualification requirements for retirement plans (Notice 2015-84); [2] Year-end IRA reminders; [3] FAQs on new IRS compliance questions on the 2015 Form 5500-series returns, explaining the optional questions; and [4] Form 5500 automatic extension to file has been changed back to 2-1/2 months." (Internal Revenue Service [IRS])
[Guidance Overview] IRS Tax Preparedness Series: Most Retirees Need to Take Required Retirement Plan Distributions by Dec. 31
"The [IRS] today reminded taxpayers born before July 1, 1945, that they generally must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.... 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 2015 RMD, this amount is on the 2014 Form 5498 normally issued to the owner during January 2015." (Internal Revenue Service [IRS])
Whose Trust Should Be Named as Your IRA Beneficiary?
"One of the tax code requirements to allow a trust to use stretch distributions is that the trust be irrevocable or become irrevocable at death. If Peggy is the first to die, her trust will become irrevocable but Tom is still alive. His trust remains revocable. His trust will not be able to utilize stretch provisions. The reverse situation works out the same way.... Tom should name his trust as the beneficiary of his retirement accounts and Peggy should name her trust as the beneficiary of her retirement accounts." (Slott Report)
Required Minimum Distributions and the Roth Recharacterization Issue
"When you have an IRA required minimum distribution (RMD) for the year, you generally use the prior year-end IRA account balance to calculate the RMD. There are a couple of exceptions to this rule and Roth recharacterizations are one of them." (Slott Report)
The Right Way to Take IRA Withdrawals
"There is no tax advantage to taking your required minimum distribution (RMD) in one lump sum annually vs. installments throughout the year. But the timing of your distribution is important[.]" (Money)
[Guidance Overview] IRA Aggregation Rule and Pro-Rata IRA Taxation
"Fortunately, ... the IRA aggregation rules do not apply when calculating substantially equal periodic payments (SEPP) under Section 72(t), reducing the danger that a withdrawal from one IRA could constitute a 'modification' of the ongoing 72(t) distributions from another that would trigger a retroactive penalty. However, even in the case of SEPPs, the IRA aggregation rules will still apply in determining how much of a 72(t) payment constitutes a tax-free return of non-deductible contributions!" (Michael Kitces in Nerd's Eye View)
Don't Use a QLAC to Avoid RMD Obligations
"The ability to accumulate mortality credits still means [a QLAC] can be very effective as a fixed income alternative for those who fear they may not have enough money to fund a retirement well beyond their life expectancy. And if [such a] retiree intends to spend all of his/her assets anyway, and the only available dollars for retirement are held in an IRA or other retirement account, the QLAC is an effective means to engage in such a strategy. Nonetheless, the bottom line is that while a QLAC may be a valid way to use a retirement account to hedge against longevity -- and defer RMDs along the way -- it's still not very effective as an RMD avoidance or deferral strategy!" (Michael Kitces in Nerd's Eye View)
The Most Important Piece of Information IRA Beneficiaries Must Know
"When you inherit an IRA, don't immediately take a distribution! By doing so, you may lose an important tax break, the ability to stretch required minimum distributions (RMDs) from the inherited IRA over your life expectancy and even have the RMDs continue to a successor beneficiary after your death. While there has been legislation proposed to eliminate the 'stretch' tax break for IRA beneficiaries, currently it still remains available and beneficiaries will want to know how to take advantage of it." (Slott Report)
Portfolio Survival: The Chain of Longevity Risk
"Path dependence refers to the fact that, once we begin spending from a volatile portfolio, the order of market returns can change the portfolio's value.... The best possible outcome is achieved when our market returns are ordered from best to worst. The worst possible outcome is the reverse.... Path dependent risk is not market risk, cannot be diversified away like market risk, and therefore we can't be compensated for it.... Path-dependence can lead to portfolio ruin, but it probably won't if we lower spending when our portfolio is stressed." (The Retirement Cafe)
IRA Required Minimum Distribution Worksheet: Younger Spouse as Beneficiary (PDF)
"If your spouse is the sole beneficiary of your IRA and he or she is more than 10 years younger than you, use this worksheet to calculate this year's required withdrawal for your traditional IRA." (Internal Revenue Service [IRS])
IRA Required Minimum Distribution Worksheet (PDF)
"IRA Required Minimum Distribution Worksheet: Use this worksheet to figure this year's required withdrawal for your traditional IRA unless your spouse is the sole beneficiary of your IRA and he or she is more than 10 years younger than you." (Internal Revenue Service [IRS])
IRA Withdrawals in 2013 and Longitudinal Results, 2010-2013 (PDF)
"Just over 22 percent of individuals who owned a Traditional or Roth [IRA] took a withdrawal in 2013. The overall IRA withdrawal percentage was largely driven by activity among individuals ages 70-1/2 or older owning a Traditional IRA ... [A]mong individuals under age 60, 10 percent or fewer had a withdrawal. For those at the RMD age, the withdrawal rates at the median appeared close to the amount that was required to be withdrawn, though some were significantly more.... Among those ages 70 or older, withdrawal rates over a four-year period showed that most individuals were withdrawing at a rate that was likely to be able to sustain some level of post-retirement income from IRAs as the individual continued to age." (Employee Benefit Research Institute [EBRI])
When Should I Take My IRA RMD?
"Getting money out of that account earlier rather than later allows the net proceeds to be reinvested sooner in long-term gain-producing investments that will get a stepped-up basis at death ... The retiree who takes the RMD late in the year is seeking some or all of the following advantages: The gross income generated by the distribution is not taxable until as late as possible.... The longer the RMD stays in the IRA, the more tax-deferred income it can generate.... You have a better chance of getting in on any tax rule changes that occur late in the year." (Morningstar)
Age 70-1/2? Think Through Your RMD Choices
"The person who thinks that postponing is always a good idea because you defer the taxes a little longer should remember that postponing actually increases the amount of the second year's RMD -- because the age 70-1/2 year RMD that you did not take in the age 70-1/2 year is still part of the account balance at the end of the year! ... If the first year's RMD is postponed, two RMDs are required in the second year, and the two RMDs in the second year will have different deadlines, be based on different account balances, and use different divisors!" (Natalie Choate, via Morningstar Advisor)
Four Steps to Taking a Roth Conversion After Age 70-1/2
"It is crucial that you take the RMD before doing the Roth conversion. Missing that step means that you end up with an excess contribution, in the amount of the RMD, rolled over to the Roth IRA. The excess contribution is subject to a penalty of 6% per year for every year that it remains in the Roth IRA." (Slott Report)
A Small But Important Change Proposed for Retirement Savings Rules
"The Obama proposal, which was buried in last February's budget, would exempt those with $100,000 or less in traditional retirement plans from having to make minimum required taxable withdrawals at all. Of course, they always could take out funds if they needed to (and would owe tax on the distribution) but they would not have to.... The idea is a very nice follow-up to rules Treasury adopted a year ago that would allow retirees to avoid the MRD tax on up to $125,000 of retirement savings they convert into longevity annuities." (Forbes)
Seven Ways You Can Mess Up Your Required Minimum Distribution
"[1] Using the wrong table to determine your life expectancy factor.... [2] Taking your RMD from the wrong type of account.... [3] Failing to adjust your prior year-end balance for an outstanding rollover or transfer.... [4] Failing to adjust your prior year-end balance for a recharacterization of a Roth IRA conversion made in the year after conversion.... [5] Taking your RMD from your spouse's retirement account.... [6] Forgetting to take your RMD altogether.... [7] Failing to timely correct any mistakes you uncover." (Slott Report)
[Guidance Overview] IRS Updates EPCRS, Reduces Some Fees
"We had hoped that the IRS would allow self-correction of loan errors without filing, but they have not done so. But they have significantly reduced the filing fees, thereby relieving one of the impediments that kept plan sponsors from using VCP for the benefit of their participants.... [T]he IRS has adjusted the filing fee related to failure to make required minimum distributions.... One of the most important categories of fixes within EPCRS relates to overpayments ... In an appropriate situation, the employer can pay the overpayment without trying to recover it from the participant, or can amend the plan retroactively to conform to what was done." (SunGard Relius)
[Guidance Overview] Required Minimum Distributions for 5% Owners of Companies Sponsoring Retirement Plans (PDF)
"It's possible for an individual's ownership percentage to change. The timing of such a change can have a critical impact on whether the individual is required to take an RMD. An explanation of the current rules for 5% owners follows, as well as some examples that outline how ownership changes can affect RMD requirements." (Pentegra Retirement Services)
Qualified Charitable Distributions from IRAs Have Lapsed Again for 2015 But May Be Reinstated Again: Do Them Anyway!
"[T]he best strategy to handle the uncertainty of whether QCDs will be extended or not is just to do them anyway! At worst, if the rules are not reinstated, the outcome will be no worse than just being forced to take an RMD and making a charitable contribution anyway. However, if the rules are brought back once again, those who make direct charitable distributions from their IRAs will enjoy all the benefits of QCDs... even if the rules are only 'fixed' after the fact!" (Michael Kitces in Nerd's Eye View)
My IRA Custodian Won't Let Me Do What?!
"IRA custodians and employer plans can sometimes limit your options. One reason they might do this is to make it easier for them to manage and process your transactions.... Stretch IRAs and spousal rollovers are basic IRA planning options. Make sure your custodian allows them. It is easy to move your funds during your lifetime; it may be difficult or impossible for your beneficiaries to accomplish a move after your death." (Slott Report)
The Problem with Naming a Trust as the Beneficiary of an Annuity, and Using a Beneficiary Designation with Restricted Payout Form as an Alternative
"In the case of retirement accounts, the IRS and Treasury have created the 'see-through' trust rules that allow post-death required minimum distributions to occur based on the life expectancy of the underlying trust beneficiaries. However, in the case of annuities, no see-through trust rules exist, compelling trusts to instead liquidate inherited annuities over the far-less-favorable 5-year rule! As a result, consideration of whether to use a trust as the beneficiary of an annuity must weigh the adverse tax consequences against the favorable/desired non-tax provisions of the trust." (Michael Kitces in Nerd's Eye View)
Inheriting a Previously-Inherited IRA: A Most Confusing Scenario
"Inherited IRA accounts are becoming more common, and advisors have learned the differences between the options a spouse has versus the options available to a non-spouse who inherits a retirement account. But do you know how to treat an IRA that was inherited from someone who inherited it from someone else? This is where the rules really get complex." (Morningstar Advisor)
The 2014 Charitable IRA Rollover: Who Might Benefit, and When Must Action Be Taken?
"On the surface, you may think it is a 'wash' if a taxpayer includes an RMD in income, and then deducts it after contributing the same amount to charity. But there are many instances in which this is not so. For example, some taxpayers do not itemize; some are subject to limitations on itemized deductions because they have high income; and some find that increased income causes other adverse tax consequences that cannot be wiped out by a charitable contribution (such as a higher percentage of social security benefits becoming taxable, and a higher threshold for deduction of medical expenses)." (Holland & Knight)

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