You might still have plenty of time to take your required minimum distributions (RMDs) from traditional IRAs and 401(k)s, according to Kiplinger’s “FAQs About Required Minimum Distributions for Retirement Account,” but you’ll want to do it sooner rather than later. If you’re older than 70 ½, you must take them by December 31st and delays could mean lost opportunities. Remember that you aren’t the only one making this transaction if you wait till the end of the year, and you’re hardly alone if you wait until the last minute. It’s best to start planning now to make the most of your options.
Here’s some additional information to help you meet your deadline for IRA withdrawals and some special rules for 401(k)s.
Start now. You should start initiating the process as soon as possible to give plenty of time for the RMD to be made. If you submit the request now, you can avoid the craziness later in the year because call and request volume for financial service providers gets very high at year-end. In addition, if your transaction requires you to sell any holdings, it can take time and may be delayed with the markets closed during the holidays. Best to start communicating with your financial professional now so you have plenty of time to make timely transactions.
Charitable giving. If you want to give some of the RMD from your IRA to charity, there’s good news: you’re allowed to give up to $100,000 from an IRA to charity! You can make the transfer anytime during the year. This is called a qualified charitable distribution and must be completed by December 31 to qualify as your RMD.
Your first RMD. The date of your first RMD is based on when you turn 70½, not 70. If you’re turning 70 between January and June, you turn 70½ in 2017 and must take your first RMD from traditional IRAs this year (or you can wait until April 1, 2018 to take the first withdrawal, but you have to take the second withdrawal by December 31, 2018). Those turning 70 between July and December 2017 won’t hit 70½ until 2018. Therefore, they’ll need to take their first required withdrawal sometime in 2018. Or they can wait until April 1, 2019 to take the first withdrawal), but have to take their second withdrawal before December 31, 2019.
Specific RMD rules for 401(k)s. Retirees must take RMDs from 401(k)s starting at age 70 ½, the same as for traditional IRAs. Are you still working? Then you can wait to take your RMD from your current employer’s 401(k) until after you have stopped working. The exception: if you own 5% or more of the company.
RMD rules can be a little confusing. If you have questions, ask your financial professional and estate planning attorney for guidance. For more information on the importance of your assets and aligning them with your estate plan, explore our website and contact us to schedule your consultation today!
Reference: Kiplinger’s (November 23, 2016) “FAQs About Required Minimum Distributions for Retirement Accounts”