The Internal Revenue Service reminds retirees born before July 1, 1949, that they usually must take distributions from their retirement plans by Dec. 31.
The payments, called required minimum distributions (RMDs), are normally made by the end of the year. Those who turned 70½ in 2019 are allowed to wait until April 1, 2020, to take their first RMDs, the IRS said in a Dec. 10 news release.
The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by December 31. For example, a taxpayer who is 70½ in 2018 and receives the first RMD on April 1, 2019, must receive a second RMD by December 31, 2019.
The required distribution rules apply to:
■ Owners of traditional Individual Retirement Arrangements (IRAs)
■ Owners of traditional Simplified Employee Pension (SEP) IRAs
■ Owners of Savings Incentive Match Plans for Employees (SIMPLE) IRAs
■ Participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans
Roth IRAs don’t require distributions while the original owner is alive.
An IRA trustee, or plan administrator, must report the amount of the RMD to the IRA owner. Alternatively, an IRA trustee may offer to calculate the amount of the RMD for the owner.
An IRA owner, or trustee, must calculate the RMD separately for each IRA owned. However, they can choose to withdraw the total amount from one or more of the IRAs. In contrast, RMDs required from workplace retirement plans must be taken separately from each account.
The RMD is based on the taxpayer’s life expectancy and their account balance.