Tick, Tick, Tick… Time Running Out to Take Your Annual RMD
Category: Financial and taxes in retirement
December 6, 2015 — If you have a 401(k) and/or an IRA, and you turned 70 and 1/2 in 2014 or earlier, you have a very big deadline coming December 31. That is the date by which you must take your annual Required Minimum Distribution (RMD), or face significant penalties. A surprising number of people fail to take these distributions. All of the money taken from regular
Comments on "Tick, Tick, Tick… Time Running Out to Take Your Annual RMD"
ella says:
For the past several years, and maybe longer (i wouldn't know as it didn't affect me then), Congress has passed legislation stating that money distributed from a traditional IRA and given to a charitable organization is TAX FREE. Often the law is not passed until January of the new year, so you are taking a chance. But if you had planned to give anyway, it can be a win-win.
This has to be done in a very specific way depending on where your IRA is held (ie. Fidelity, TIAA-Cref), so you'd need to call your financial institution to ask what they require for this to be accomplished. Even if you can't get this together for 2015, there's always next year. Season's Greetings to all!
Linda says:
This can all be automated with whoever is the custodian of your IRA. They will calculate the RMD every year, withdraw it on the date you specify, and send it to the account you specify. Very simple to set up. You can even specify the amount of taxes you want withheld.
Louise says:
Don't forget if you inherited an IRA from a parent you need to take RMD as well. My Mother died at age 79 and had been taking RMD since 70 years old. After she passed, I had to take RMD from her IRA at age 61.
Here is a calculator that may help you estimate what Beneficiary RMD you may have to pay. I just used it for 'fun' but will rely on my Financial Advisor in January to calculate what needs to be withdrawn in 2016. http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/ira_calculators/beneficiary_rmd
I just found this calculator about a week ago and had no idea that the RMD goes up and up as the years pass. I thought it was a flat rate forever. That was an eye opener for me!
LS says:
The RMD percentage of withdrawal is low initially so that your account will last you for your expected years of remaining life. As your account decreases over time, the percentage of withdrawal needs to increase so that your annual income is somewhat stable until the end.
Rich says:
My wife and I will just be reaching 68 starting this month. We have a long-term budget which shows our retirement investments being withdrawn only at a 2% rate for several more years -- long after RMD kicks in with it's higher requirements. So while it's not urgent, there are two major questions that I don't yet have answers for:
-- Will our RMD(s) be calculated on our joint investments or our individual personal investment? We have filed taxes jointly for more than 40 years, so I have been assuming RMD will be joint.
-- If we only have a need for 2% annual withdrawal to maintain our long-term budget, but must withdraw almost twice that (and growing) for RMD, how will what we do with our withdrawn RMD affect future RMDs? It's small to begin, so we will probably just put the extra in savings, but from year 2 onward, holding large funds in savings is not part of our investment strategy. I would ideally want to put the "excess" RMD into a new investment portfolio. Will that investment then also be subject to the RMD total I must consider? If so, it would be like double taxing the same funds. I would rather "blow" the money on enjoying life. At some point, the RMD formula becomes more consistent with inflation and costs could increase to exhaust the annual RMD, but life does not necessarily end at 85 and it's prudent to plan at least somewhat beyond. (fyi, our budget plans says that our "funds" will last beyond 90 though we aren't so sure our "fun" will last that long... :<)