A recent Thomson Reuters article informs that as the end of the year approaches, it is important for older taxpayers to pay attention to their required minimum distributions (RMDs) for the year. A RMD is the minimum amount one must withdraw from his or her retirement plans account each year.
When Required Minimum Distributions Apply:
- For traditional IRAs, taxpayers must begin taking RMDs by April 1following the year they reach 70½.
- For qualified plans such as a 401(k), taxpayers must begin taking RMDs by 1) April 1 following the year they reach 70½, or 2) when the taxpayer retires (if he or she is a non 5% owner in the business).
- For qualified plans such as a 401(k), taxpayers must begin taking RMDs by April 1following the year they reach 70½ if a taxpayer is a 5% or more owner in the business.
Failure to Withdraw
Lack of attention to your RMD can lead to stiff penalties. For example, not withdrawing your annual RMD for the necessary minimum amount could result in exposure to a tax penalty of 50% of the amount not withdrawn.
For more information on required minimum distributions, please read the full referenced article, or visit Retirement Plans on the IRS website. For assistance in anticipating your required minimum distribution, contact Brenda Jacobs at (616) 608-8530 or email@example.com.