Who Must Take RMD?
Traditional IRA owners and qualified plan participants.
When to Take RMD?
Must begin by the individual’s required beginning date (RBD).
- Traditional IRA Owner: April 1 of the year following the year the individual turns 70½
- Plan Participant/More-than-5-percent Owner: April 1 of the year following the year the individual turns 70½
- Plan Participant/Not More-than 5-percent Owner: April 1 of the year following the later of the year the individual turns 70½ or retires
Can RMD Be Delayed?
Qualified plan participants who own 5 percent or less of the business and plan on working past age 70½ can delay their RMDs — provided the plan allows deferrals beyond that age. Note: The delay applies only to the qualified plan of the current employer.
How to Delay RMD?
RMDs from IRAs and qualified plans not annuitized are calculated using the life expectancy method. Using this method, the amount that must be distributed each year is determined by
Account Balance as of December 31 of Prior Year / Life Expectancy Factor
The life expectancy factor is taken from the Uniform Lifetime Table (see page 6) unless the sole beneficiary of the account is the individual’s spouse and the spouse is more than 10 years younger than the individual. In that case, use the Joint and Last Survivor Table. It will produce larger factors and thus smaller RMDs.
Individuals can delay their RMD for their first distribution year until April 1 of the following year (their required beginning date). However, if individuals do wait until April 1 of the following year, they must take a second RMD by December 31 of that same year. For determining the amount of the RMD for the second and future distribution years, the appropriate table is re-entered each year using the age of the individual as of the end of that calendar year (the “attained age” method).
Remember: Aggregation Rules Differ
Qualified Plans:
RMDs must be calculated for each separate qualified plan and distributed from each separate plan.
Traditional IRAs:
RMDs must also be calculated separately for each IRA; however, an individual generally may total the amount of RMDs from each IRA but then take the total amount from one or more IRAs.
Exceptions:
• IRAs held as an owner cannot be aggregated with IRAs held as a beneficiary
• IRAs held as a beneficiary can be aggregated with other IRAs inherited from the same decedent only
In our next blogpost, we will discuss RMD distributions upon death.