RMD 2010
i AM RETIRED AND AGE 72. I HAVE TO WITHDRAW MY RMD FROM MY IRA ACCOUNTS. I AM STILL WORKING AND AN EMPLOYEE OF A COMPANY WHERE I HAVE A SIMPLE IRA. I DID NOT EARN ANY MONEY THIS YEAR(2010) SINCE THE COMPANY DID NOT HAVE ANY JOB. IN THE YEAR 2009 AND BEFORE, I HAVE EARNED INCOME FROM THIS COMPANY. THIS COMPANY CONTRIBUTED CERTAIN PERCENTAGE OF MY EARNING INTO THIS SIMPLE IRA. THIS YEAR, THIS COMPANY DID NOT CONTRIBUTE ANY MONEY INTO MY SIMPLE IRA SINCE I DID NOT EARN MONEY. CAN I EXCLUDE THIS COMPANY SIMPLE IRA TO CALCULATE MY RMD THIS YEAR SINCE I AM STILL AN EMPLOYEE?
MADAVAN MAKAYEE
Permalink Submitted by Alan Spross on Thu, 2010-09-16 19:22
Sorry, but you must include the 12/31/2009 balance for all of your IRAs including SIMPLE or SEP IRAs in determining your RMD. Once you determine the RMD for each of your accounts, you are permitted to satisfy the total RMD in any combination you wish from any of those accounts. In other words, you must calculate your SIMPLE IRA RMD, but you can then take that amount from one of the other IRA accounts.
After age 70.5, participants in SEP or SIMPLE IRA accounts can continue to contribute, but ALSO must take out the RMDs for the same years.
The “still working” RMD exception applies to qualified plans, but NOT to any type of IRA account.
Permalink Submitted by Dave Petersen on Thu, 2010-09-30 16:02
I have a client who recently retired and is 72. Since he was working the past few years, he hasn’t had to w/draw his RMD from his 401k. Since he retired this year (2010) my understanding is that he’ll be required to take his first RMD this year. My question is: since this is his first RMD, is he allowed to wait until 4/1/11 the way a 70.5 year old taking their first w/drawal can do?
Permalink Submitted by Alan Spross on Thu, 2010-09-30 17:36
Yes, his required beginning date is 4/1 in the year following his separation from service.
2010 is an RMD distribution year and his 12/31/09 plan balance will be used to calculate his RMD, but perhaps taking 2 RMDs in 2011 will be to his advantage. Might be worth seeing what Congress does about 2011 tax rates. Note that he can take any portion of his 2010 RMD he wishes to this year and defer the rest to 2011. There is no “all or nothing” requirement for his 2010 RMD.
Don’t forget to consider any NUA potential if he has highly appreciated employer stock in the plan. Distribution of employer stock will be credited to his RMD. If he does the LSD in 2011 the value of the stock upon distribution would be credited against both his 2010 and 2011 RMDs, but must be done prior to 4/1 to meet the RBD for 2010.