Required Minimum Distributions

On June 2024, Schwab provided an update about viewing and taking your RMD on Schwab.com.

Taxpayers waiting for final guidance, have seen penalties waived for 2021 or 2022 RMDs, for 2023 RMDs, and now for 2024 RMDs.

While not the most favorable RMD rules imaginable, I’m sure it is still a relief to know that you don’t need to navigate the new SECURE Act rules just because you dissolved the trust.

Within employer-sponsored retirement plans, there are special provisions for employees (not owners) who continue to work beyond their typical required beginning date.

“And the now-20-year-old beneficiary who lost her father less than a year ago is supposed to navigate this mess on her own? No chance. This is madness.”

This notice did not offer the final guidance we were hoping for, but rather continued to push the decision further down the road.

We recommend waiting for the final guidance but being prepared for some sort of required distribution this year.

This update amends the Roth-side of employer retirement plans to behave more like Roth IRAs prior to death.

Later required beginning dates are generally advantageous to seniors, although the complexity surrounding RMD rules is nothing to celebrate.

In 2019, the SECURE Act changed how inherited RMD rules work. After many IRS notices, we now aren’t sure how the new rules work.

There are different tables and formulas used to calculate your RMD divisor based on your particular circumstances. Here is a calculator for the three most common.

The SECURE Act of 2019 changed several things, so here is an updated review of this complex subject.

This latest notice now gives both seniors and heirs who have not yet been able to put their formerly RMD funds back into their IRAs the chance of redistributing those funds to the IRA that distributed them.

Hopefully, this extension helps some take advantage of this welcome relief.

In this way, those with inherited IRA distributions they would like to reverse or those with distributions no longer eligible for regular 60-day rollover contributions may be able to still complete either a Roth conversion or IRA redistribution with those assets.

Hopefully, this bit of tax history gives seniors and heirs a bit of comfort in taking advantage of this welcome relief.

Among the temporary measures, Congress waived required minimum distribution (RMD) requirements for only tax year 2020.

If you inherit a traditional IRA from a person who had a basis in the IRA because of nondeductible contributions, that basis remains with the IRA assets as they come into your ownership.

On May 23, 2019, the House passed the Setting Every Community Up for Retirement Enhancement Act of 2019 with a vote of 417 Yeas and 3 Nays. It is on its way to the Senate.

For those who are doing it themselves, this page can help you satisfy this important IRS requirement.

Most divisors are looked up in tables based on your age. Others are calculated based on last year’s divisor. Some particularly unfortunate cases have distribution deadlines rather than divisors at all.

Oddly enough, how a trust inherits an IRA is as important as what it does with the IRA after receiving it.

Anyone who has to take RMDs from their employer sponsored retirement plan, sadly, has to take RMDs from all components of the plan, even Roth deferrals!

Among the most complicated and frustrating IRA rules are required minimum distributions (RMDs). This case is a classic example.

The required IRA distribution in the year the account owner dies is called a Year of Death RMD.

There is a tangled web of rules and options. For any given family situation and set of desires, there is a best answer when it comes to meeting your wishes, minimizing the tax owed, and optimizing your estate plan.

For Inherited IRAs, all the Required Minimum Distribution (RMD) rules are complicated. There is no easy case.

There is unique tax planning involved though when an age 70 1/2 IRA owner was younger than the beneficiary.

You can take the RMD out as early as January 1st or as late as December 31st, but when should you?

The tax penalty for failing to take an RMD is steep at 50% of the amount you fail to take, so it is essential that you make the effort to take your RMD, even when having illiquid investments creates extra hassle.

Can you aggregate RMDs? Yes, for some account types. Should you aggregate your RMDs? Not unless you have a really good reason to.

Although you can have second generation beneficiaries, the first non-spouse designated beneficiary is the last one to receive a new RMD divisor calculation.

Unfortunately the age restriction makes the charitably-inclined young, who are more likely to be in the 0% capital gains bracket, unable to make QCDs.

There are different tables and formulas used to calculate your RMD divisor based on your particular circumstances. Here is a calculator for the three most common.

Inherited RMD rules demonstrates the power and importance of beneficiary designations and why it is so important to set them.

When a spouse inherits retirement account assets, they have the right to do what is called a “Spousal Rollover” or “Spousal Transfer.” It is almost always the right option.

If you are a mixed-decade couple, take advantage of the Joint divisor by making your spouse your primary and sole beneficiary for your IRA and use the Joint Life and Last Survivor Expectancy Table to find your RMD.

The key to getting the waiver though is showing that “you are taking reasonable steps to remedy the shortfall.”

Although legally fine, this strategy often causes you to accidentally increase your spending every year and decrease your savings. Don’t let the IRS rules about IRA withdrawals tempt you into spending money you had planned to save.

Some people don’t stop at distributing just the required minimum. They think, “Well, while I’m at it, I may as well pull out a little bit more so we can fully cover the kitchen remodel…”

What if you do not need all the money from your RMD and you are also charitably inclined?

A Roth recharacterization is a true undo; it is as though you never converted those assets in the eyes of the IRS. This includes recalculating your RMD had you not converted the assets.

A simple summary of how to meet your Required Minimum Distribution in the same year as you perform a Roth Conversion is the axiom: RMD dollars must come out first.

QCDs allow individuals age 70 1/2 or older to give directly to a charity from your IRA without counting the distribution as taxable income.

After you reach the age of 70 1/2, the IRS requires you to begin taking minimum distributions from your traditional retirement accounts.

Annual required minimum distributions must be satisfied before any additional amounts are converted to a Roth IRA.

It is often said that the only two certainties in life are death and taxes. The IRS takes that truism to heart.

Although a number of tax breaks got snuffed out by the recent tax compromise passed on January 1, the ability to make charitable contributions from IRA accounts for people older than 70 1/2 was given new life.

The tax code provision that allowed IRA owners to contribute up to $100,000 directly from their IRA to the qualified charity of their choice–without recognizing the donation as income–expired at the end of 2011, but what if it is reinstated?

There are three IRA tax requirements and saving techniques which collided recently for a client. I found a solution.