What Does the Required Minimum Distribution Mean?Submitted by Shoemaker Financial on September 26th, 2018
You spent decades saving for retirement. A long time ago, you understood and took to heart the advice about the importance of your retirement savings. You’ve just turned 70, and you’re proud of your financial achievements.
You worked hard; you sacrificed, and now you’re retired and doing well enough so that you don’t have to take money from your retirement savings. After all, you’re still healthy and strong, and you’d prefer to let your retirement investments grow even more. And, besides, you don’t really need it right now.
The truth is, federal rules require you to begin making regular withdrawals from certain retirement savings accounts once you reach 70½. It’s called the Required Minimum Distribution, and it’s the minimum you have to withdraw per year. In other words, you don’t have a choice.
The RMD rule applies to certain plans.
Once you reach 70½, you have to start making withdrawals from IRAs, SIMPLE IRAs, SEP IRAs, and other retirement accounts. Roth IRAs are exempt from the requirement until the account owner dies.
Here are two important provisions:
< >You may withdraw more than the minimum required amount.Withdrawals are considered taxable income; exceptions include money that was previously taxed or is considered tax free, such as distributions from certain Roth accounts.https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets.
The link directs you to select between two options:
< >A worksheet to calculate your withdrawal if your spouse is more than 10 years younger than you.A worksheet for everyone else.Form 5329.” “Form 5329 instructions” provides additional information about the excise tax.
If you would like to discuss your retirement distribution options or other financial strategies, give us a call. We’re happy to talk.
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