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Distributions - req. minimums

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How a Raising the Age for Required Withdrawals Could Impact Your Retirement
"The Secure Act, which passed the House of Representatives in May and awaits action in the Senate, would increase the age for required minimum distributions to 72 from 70-1/2. A theoretical $500,000 portfolio, earning 5% annually, would have $33,500 more at age 89 if the RMDs started at age 72." (CNBC)
EBSA Missing Participant Investigations Triggered by Social Security Notice of Possible Plan Benefits
"[T]he increased interest in retirees over the age of 70-1/2 began in the Philadelphia regional office because Social Security advised new recipients of entitlement to possible benefits from long-forgotten retirement plans.... More than half a billion dollars of unpaid retirement benefits were discovered in only six defined benefit plans.... Recent efforts by the EBSA have resulted in the opening of investigations against trustees, plan administrators and Third Party Administrators.... The initiative which began on the east coast with the Philadelphia office has now migrated to west coast offices." (Jackson Lewis P.C.)
Crowdout in the Decumulation Phase: Evidence from the First Year of Required Minimum Distributions
"This study estimates the extent to which a policy-induced increase in distributions at retirement crowds out dissaving from taxable assets.... The study shows that retirement distributions at age 70 vary discontinuously at a statutory threshold in exact day of birth. Using this discontinuity as a first stage, the study finds that taxable saving becomes more positive (or less negative) among those whose retirement distributions are induced to be higher. In the baseline specification, ratio at which induced retirement contributions crowd out taxable dissaving is estimated to be 0.42." (Lucas Goodman, via SSRN)
Proposed Tweaks to the 401(k) System Are Small Ball, But Welcome
"The Secure Act ... boosts incentives for small businesses to offer their employees 401(k)s and to enable the businesses to enroll employees automatically once a plan is in place. It enables part-time workers to join 401(k)s. Also, it raises from 70-1/2 to 72 the age at which [IRAs] must be tapped.... [T]he Secure Act includes offsets for most of its $5.7 billion in new tax breaks over the next five years, and is fully paid for over a decade." (The Washington Post; subscription may be required)
[Official Guidance] Text of IRS Notice 2019-18: Offering a Lump-Sum Payment Option to Retirees Currently Receiving Annuity Payments Under a Defined Benefit Plan (PDF)
"This notice is to inform taxpayers that the Department of the Treasury and the [IRS] no longer intend to amend the required minimum distribution regulations under Section 401(a)(9) of the Internal Revenue Code to address the practice of offering retirees and beneficiaries who are currently receiving annuity payments under a defined benefit plan a temporary option to elect a lump-sum payment in lieu of future annuity payments." (Internal Revenue Service [IRS])
Estimating the Effects of the Required Minimum Distribution Rules on Withdrawals from IRAs
23 pages. "In each year, approximately 20 percent of 60-year-old IRA holders took distributions. For each year this percentage increased linearly until age 70 ... There was a sharp increase at age 70-1/2 ... In 2008 and 2010 -- years in which required minimum distribution rules were in place -- roughly 95 percent of those age 70-1/2 to 85 took distributions. This substantial increase relative to younger ages is evidence of the effect of these rules." [JCX-5-2019, Feb. 22, 2019] (Joint Committee on Taxation [JCT], U.S. Congress)
Tricky Timelines If You Miss an RMD
"When a client fails to take a required minimum distribution, you usually want to seek a waiver of the 50% penalty ... using IRS Form 5329. But for what year or years do you file that form? Do you have to file it for every year that has passed since the RMD was missed?" (Natalie Choate, in Morningstar; free registration may be required)
Could the Government Take the Bite Out of RMDs?
"[T]he executive and legislative branches have been floating ideas to reduce the RMD bite ... The changes that are the most likely to happen are the least likely to be meaningful enough for retirees to even notice. However, a legislative proposal from Sen. Rob Portman and Sen. Ben Cardin would dramatically change RMDs for retirees over the next decade, although it might also lead to future RMD shocks." (Morningstar Advisor)
[Official Guidance] Text of 2018 Instructions for IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (PDF)
"You must file Form 5329 if any of the following apply ... [1] You received a distribution from a Roth IRA and either the amount on line 25c of Form 8606 ... is more than zero, or the distribution includes a recapture amount subject to the 10% additional tax, or it's a qualified first-time homebuyer distribution ... [2] You received a distribution subject to the tax on early distributions from a qualified retirement plan ... [3] The contributions for 2018 to your traditional IRAs, Roth IRAs, Coverdell ESAs, Archer MSAs, HSAs, or ABLE accounts exceed your maximum contribution limit ... [4] You didn't receive the minimum required distribution from your qualified retirement plan." (Internal Revenue Service [IRS])
What to Do if You Missed Your RMD
"There is no effect on the prior year other than you have a potential 50% penalty.... [As] soon as you discover it, you should figure out the amount you were short or whatever the RMD that was missed, and take the makeup distribution immediately. Then, of course, take you regular distribution for the year so you stay on track. And then you report that on ... Form 5329.... [Y]ou must attach a statement saying two things: number one, that I made up the shortfall, you have to show good faith that whatever I missed, I took immediately upon discovery. Then give a short explanation of why, and IRS waives the penalty in almost every case." (Morningstar Advisor)
Pros and Cons of Completing a Rollover Before Year-End
"[A]ny money that leaves one account must be out before December 31st, but beyond the common timeframes for rollovers, it's okay if the money doesn't transfer into the receiving account until after January 1st. One thing that's important to keep in mind for clients subject to RMDs, however, is that the custodian likely will not track that last minute change, and it will be up to the advisor to make sure to account for any year-end balance increases for the following year's RMD." (Nerd's Eye View)
[Guidance Overview] IRS Extends Transition Relief for New Escheated IRA Tax Withholding, Reporting Rules
"[T]he extended transition relief applies to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable to comply with the new rules.... [Rev. Rul. 2018‑17] is silent as to whether the IRA owner may roll the escheated IRA over to an eligible IRA and, if the rollover is permitted, when the 60-day period to make the rollover begins.... The Revenue Ruling is also silent as to whether an IRA owner who is under age 59‑1/2 at the time of an escheatment (in those states that escheat before the IRA owner reaches age 70‑1/2) would be liable for the 10% penalty tax for early IRA distributions.... [It also] does not address the tax withholding and reporting requirements for a SEP, SIMPLE, or Roth IRA." (Morgan Lewis)
Year-End Required Minimum Distribution Considerations
"If you have a RMD from a 401(k) plan, the RMD amount must be calculated separately. You cannot lump the amount together with another plan account or IRA.... RMD's are not eligible for a rollover.... If the account holder died during the year, the RMD must still be made." (Watkins Ross)
Reasons Why the Smoothed Actuarial Budget Benchmark is Superior to IRS RMD for Developing Spending Budgets
"[T]he RMD suffers from the following deficiencies: ... The assumptions underlying RMD withdrawal factors are questionable and are inconsistent with assumptions used to price inflation-indexed annuities.... [T]he RMD withdrawal factors are not based on one's life expectancy. Application of RMD is unclear for ages under 70. RMD doesn't coordinate with other sources of income. RMD doesn't consider non-recurring expenses.... RMD is inflexible and doesn't accommodate 'budget shaping.' " (Ken Steiner, FSA Retired)
Minimum Distribution Problems: Why They Exist and What Can Be Done
"While many retirees manage to take their RMDs from account balances of the employer from which they retire, it is less likely that they will remember to do so from the employer at which they worked in their 20s.... Plan sponsors should carefully review a list of current and former employees to determine who has not taken their RMD ... [T]he retirement plan should be amended to state that RMDs will be automatically distributed to employees who do not respond within a certain timeframe." (401K Specialist)
Are RMDs Required for a Retiree Turned Independent Contractor?
"Based on her age and the fact that you mention she will no longer be an employee as of the end of 2018, her first RMD will be due no later than April 1, 2019. That brings us to the more complicated part of the question...whether or not she truly ceases to be an employee when her new work arrangement starts on December 1, 2018. Unfortunately, the answer is not as clear cut as simply looking at the agreement you made with her or the fact that she now receives a 1099 rather than a W2 to report her pay. Instead, the IRS says that the employment/contractor status is based on who controls the arrangement." (DWC)
Minimum Distribution Problems: Why Most Retirement Plans Have Them and What Can be Done About It
"[P]lan sponsors should assume that any employee who has not taken an RMD from their plan (403(b) or otherwise) is out of compliance. Plan sponsors should then work with their recordkeeper to contact those individuals and remind them of the associated penalty for satisfying the RMD. If a plan sponsor is unable to make contact with the individuals, the retirement plan should be amended to state that RMDs will be automatically distributed to employees who do not respond within a certain timeframe." (Cammack Retirement Group)
How Early Can a Participant Take RMDs?
"To be eligible to take an RMD, a participant must wait until his or her initial 'Distribution Calendar Year.' This is defined as the year in which the participant turns age 70‑1/2. Connecting the dots, your participant could take her distribution at any point during 2019 to satisfy the RMD." (DWC)
Retirement Related Provisions of Tax Reform 2.0 Released
"Retirement-related provisions of interest to governmental plan employers and employees include: [1] Modification of pick-up contribution rules.... [2] Penalty-free withdrawals, and allowed repayment, of up to $7,500 from retirement plans in connection with a birth or adoption.... [3] Exemption from required minimum distribution rules for individuals with aggregate accounts ... not exceeding $50,000.... [4] Universal savings account.... [5] Repeal of maximum age, currently 70‑1/2, to make traditional IRA contributions.... [6] Portability of lifetime income investments." (ICMA-RC)
Assessing the Recent Proposals to Reduce RMD Obligations
"[L]ife expectancy increases have not been terribly dramatic -- no more than about 2 years of joint life expectancy for a 70-something retiree.... [T]he first RMD would actually decrease only about 25 basis points -- from 3.65% of the account balance to just 3.4% instead -- or a whopping $250 of reduced RMDs per year on an account with a $100,000 balance.... [W]hat hasn't received much attention at all is a ... proposal buried in the Retirement Enhancement and Savings Act of 2018 (RESA) ... which would eliminate the stretch IRA for most non-spouse beneficiaries, who would then be subject to the far-harsher 5‑year rule instead!" (Nerd's Eye View)
Managing a Year-of-Death RMD in an Inherited IRA
"The minute Mother died Junior owned her account. It was transferred to him automatically. But the IRA provider's records still showed only Mother's name on the account. The IRA provider's paperwork had to catch up with what had already happened: It had to change its records to show that Junior now owns this money.... An IRA-to-IRA transfer is not a rollover. An IRA-to-IRA transfer is a nonevent for minimum distribution purposes or any other purpose. It's not reportable to the IRS, either as a distribution from the old IRA or as a contribution to the new IRA." (Morningstar Advisor)
President Trump Orders Review of Open MEPs, RMD Rules
"Industry stakeholders have been calling loudly for greater use of open MEPs as one of the primary ways to address the retirement plan coverage gap. While there has been less discussion of the RMD issue, it is also a timely matter for today's retirees. In fact, 68% of retirees are only taking the required minimum distributions (RMDs) from their retirement accounts[.]" (PLANSPONSOR)
[Official Guidance] Text of Executive Order on Strengthening Retirement Security in America
"Within 180 days of the date of this order, the Secretary of Labor shall consider ... whether to issue a notice of proposed rulemaking, other guidance, or both, that would clarify when a group or association of employers or other appropriate business or organization could be an 'employer' within the meaning of section 3(5) of [ERISA] ...

"Within 1 year of the date of this order, the Secretary of Labor shall, in consultation with the Secretary of the Treasury, complete a review of actions that could be taken through regulation or guidance, or both, to make retirement plan disclosures required under ERISA and the Internal Revenue Code of 1986 more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution....

"Within 180 days of the date of this order, the Secretary of the Treasury shall ... examine the life expectancy and distribution period tables in the regulations on required minimum distributions from retirement plans and determine whether they should be updated to reflect current mortality data and whether such updates should be made annually or on another periodic basis." (The White House)

Trump Executive Order to Seek Changes to Retirement Accounts
"[An] executive order the President is expected to sign Friday will seek a review of how required minimum distributions from 401(k) plans and individual retirement accounts are calculated, and for regulators to see how small businesses can more easily band together to offer retirement plans to their workers.... The purpose of reviewing the rules would be to update those tables and allow account holders to take lower RMDs." (CNBC)
Am I Too Old to Convert My IRA to a Roth IRA?
"Given your life expectancy as you get older, say, after 70-1/2, the benefit you'll reap in your life expectancy won't be worth the upfront cost, probably.... But the real benefit if you are doing it as an older person is for the next generation, for you children or grandchildren, because the power of the Roth IRA can grow over their life expectancy." (Morningstar Advisor)
Whose Life Expectancy Is Used, When a Second-Generation (Successor) Beneficiary Inherits an IRA?
"Q: An individual inherited an IRA from her father, and had been taking distributions over her single life expectancy.... She (the original beneficiary) subsequently died, and her son now has to take distributions from the IRA which he has inherited. Should he take distributions over his life expectancy or over his mother's life expectancy? A: [H]is mother's life expectancy. The mother's life expectancy is determined in the year after the grandfather died, and 1 (one) is subtracted for each year that has passed. A second generation beneficiary's (or successor beneficiary's) life expectancy is never used to determine distributions from an [inherited IRA]." (Appleby Retirement Dictionary)
Delaying Qualified Plan RMDs with the 'Still Working' Exception
"[D]efining precisely what it means to be 'still working' (e.g., 1 hour per week, 10 hours, 20 hours?) is not something that the IRS has done. However, the general interpretation based on a plain reading of the law is that, as long as the employer still considers an individual employed, that person is 'still employed' for the purpose of the still-working exception (even if the ongoing work is of a relatively limited nature).... Another complication with determining whether an individual is 'still working' is the exclusion of the rule for 5% owners of a business.... Fortunately, this complexity does create planning opportunities which individuals can use to reduce (or at least delay) their tax bill." (Nerd's Eye View)
Most Retirees Only Withdrawing Required Minimum Distribution
"Sixty-eight percent of retirees are only taking the required minimum distributions (RMDs) from their retirement accounts, [according to] a survey of more than 1,000 retirees with at least $100,000 in investable assets. Only 21% feel confident about taking money out of these accounts.... The survey also found that the median savings these retirees have is $839,000.... 25% said they were not sure if their retirement savings will last throughout their lifetime.... 25% fell short of their retirement savings goal by $250,000 or more." (planadviser)
'Reasonable Cause' for a Missed Required Minimum Distribution
"When a participant is actually retired can be a 'facts and circumstances' determination. Has the participant been laid-off, or completely severed from employment? Is the participant on an unpaid leave of absence or on a medical or disability leave? Is the participant completely retired or still working two days a week? ... A missed RMD resulting from an employer's misunderstanding of the employee's retirement status could be a good case for a reasonable cause to have the 50% penalty waived." (PenChecks)
The Elusive Search: Considerations for Locating Missing Retirement Plan Participants (PDF)
"[R]ecent government focus and audit activity on the failure of retirement plans to make required distributions such as RMDs increases the risk of IRS penalties and excise taxes, and of claims that a breach of fiduciary duty may have occurred.... [P]lan administrators should take a fresh look at the processes they have in place for locating missing or nonresponsive plan participants." (Isler Dare)
Protect Your Qualified Plan from RMD Failures
"To help protect a plan from RMD failures and the administrative cost and hassle that follows, a plan sponsor should adopt an internal system to [1] monitor ages of participants (including former employee participants), [2] contact those who are approaching Normal Retirement Age (and at the latest age 70-1/2) to start the benefit payment process, and [3] document efforts made to locate missing participants, following the IRS guidelines." (Watkins Ross)
What to Do with Missing Participants and Required Minimum Distributions
"[T]he IRS website states that employers and plan administrators of ongoing plans may want to consider periodically using one or more of the search methods described in [DOL FAB 2014-01], as this can provide evidence of making a reasonable effort to locate RMD-eligible missing participants." (PenChecks)
[Official Guidance] Text of IRS EP Examination Memo TE/GE-04-0218-0011: Missing Participants and Beneficiaries and Required Minimum Distributions -- 403(b) Plans (PDF)
"For purposes of IRC Section 403(b)(10), EP examiners shall not challenge a 403(b) contract for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan has taken the following steps: [1] searched plan and related plan, sponsor, and publicly-available records or directories for alternative contact information; [2] used any of [three listed] search methods ... and [3] attempted contact via [USPS] certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers)." (Internal Revenue Service [IRS])
[Guidance Overview] IRS Extends RMD Audit Guidelines for Missing Participants to 403(b) Programs
"In the last year or two, it has been increasingly common for both the IRS and the DOL on audit to demand 'scorch the earth' search methods for missing participants that frequently seem to lack a realistic cost/benefit balance or due sensitivity to privacy considerations.... The guidelines do not address how plans should handle situations in which a participant address has been identified but the participant is unresponsive or will not request distribution, nor do the guidelines address circumstances in which participants fail to cash checks." (Eversheds Sutherland)
Clean Up This April with Required Minimum Distributions (PDF)
"[P]lans that allow participants to defer receipt of payment past the normal retirement date should carefully monitor participants approaching age 70.... Track any returned mail from required compliance mailings such as annual funding notices, summary material modifications, and summary plan descriptions. Then follow up with an address search.... Use one or more address search vendors that offer to continuously monitor a pension plan's vested terminated population for unreported deaths ... Automatically mail normal retirement packets 90 to 180 days prior to the participant's NRA." (Milliman)
Stanford Center for Longevity Proposes New Strategy for Retirement Income
"For the solutions they analyzed, the solutions using the [IRS] required minimum distribution and fixed index annuities did the best job of keeping up with inflation. The analyses also show retirement income solutions with a high withdrawal percentage -- 7% -- naturally spend down savings more quickly than a 3% withdrawal rate." (planadviser)
Why it's Dangerous to Ignore Undeliverable Mail Sent by Your Retirement Plan
"The DOL's position is that it is a breach of fiduciary duty for a plan sponsor not to take reasonable steps to locate missing participants that are due a benefit. The DOL has not issued official guidance on what steps would be considered reasonable, but hopefully if the IRS guidelines are followed, the DOL would find that a plan sponsor acted in good faith to find missing participants. While the IRS is addressing RMDs in all retirement plan audits, the DOL's focus appears to be more on large pension plans." (Graydon)
Strategies to Reduce Required Minimum Distributions from Retirement Accounts
"Ultimately, it's impossible to completely and indefinitely avoid the requirement to distribute retirement accounts -- if only because, even to the extent the account isn't liquidated during life, the beneficiaries will be subject to additional RMD obligations after the death of the original account owner. Nonetheless, the potential exists to at least partially manage and minimize RMDs, and mitigate some of their tax bite!" (Nerd's Eye View)
Required Minimum Distributions (RMDs): The Out-of-Sight, Out-of Mind-Problem
"Do you understand all of the shorthand references in your plan documents? Are your plan administration systems and capabilities consistent with the design and needs of your plan? Have you properly attempted to contact participants you have not heard from? Should you consider adding some form of the IRS guidelines to you plan?" (Best Best & Krieger LLP)
Delaying the Inevitable: Required Minimum Distributions for Defined Contribution Plans
"A plan sponsor may want to let account holders know that they can avoid receiving two RMDs in the initial year by taking their initial distribution in the year they attain 70-1/2. All subsequent RMDs must be paid by December 31. This includes the year in which the initial RMD is paid; ergo, account holders who receive their initial distribution using the April 1 grace period will receive a second distribution in December of the same year.... A plan sponsor should establish a policy to address how non-five-percent owners will be handled upon rehire.... There is no RMD aggregation for most qualified plans, and each qualified plan must separately calculate and pay (at least) the RMD amount.... The RMD calculations are further complicated if there are multiple beneficiaries or a death." (Findley)
Missing Participants with Unpaid Required Minimum Distributions: IRS Provides New Audit Guidance
"[A]uditors are instructed not to challenge a plan as violating the RMD rules for failing to commence or make an RMD to a missing participant or beneficiary if the plan has taken [specific] steps ... This guidance, which applies to audits of cases that were already open on October 19, 2017, and to cases opened after that date, will be helpful for plans that have unpaid RMDs and are undergoing IRS audits now or in the future." (Segal Consulting)
[Official Guidance] Text of IRS Memo for EP Employees on Missing Participants and Beneficiaries and Required Minimum Distributions (PDF)
"This memorandum directs EP examiners not to challenge a qualified plan as failing to satisfy the required minimum distribution (RMD) standards under Internal Revenue Code Section 401(a)(9) in [specified] circumstances ... This memo addresses only the application of IRC Section 401(a)(9) to certain circumstances involving a plan's action related to a benefit of a participant or beneficiary whom the plan is unable to locate and does not address the application of any other qualification requirements or other applicable law, including Title I of ERISA." [TE/GE-04-1017-0033, Oct. 19, 2017] (Internal Revenue Service [IRS])
Spousal Rollover Rules for Inherited Roth and Traditional IRAs
"Ultimately, the good news is that spousal beneficiaries have the option to make either choice, and even have flexibility about the timing -- allowing a decision to maintain an inherited stretch IRA for the spouse initially, and completing a spousal rollover later (after he/she turns age 59-1/2). Nonetheless, it's important to carefully consider the choices and trade-offs... especially since a spousal rollover, once completed, is irrevocable and cannot be undone after the fact!" (Nerd's Eye View)
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)
[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)
[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)
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