partial RMD at age 70.5

Submitted by rick nommensen on Tue, 2014-12-09 20:03

Instead of deferring all of a person’s RMD when they turn 70.5 until April 1 of the following year, can they defer a portion of it. In other words do the distributions taken in the year you turn 70.5 reduce the amount that has to be taken by April 1st of the following year? If so, can you cite your authority on this?

Thanks.



Submitted by Alan - IRA critic on Tue, 2014-12-09 20:59

  • A portion of the first RMD distribution year can be taken in that year as long as the rest is distributed by 4/1 of the following year (the RBD). This is fairly clear as stated in the pargraph “Distributions by the required beginning date” on p 34 of Pub 590. In fact, largely because of the way SS benefits are taxed, some taxpayers can save on their total 2 year tax bill by taking a portion of the first year RMD in the first year instead of all or none.
  • The authority is based on two RMD concepts. First, any distribution taken in the first RMD distribution year (year 70.5 is reached) is deemed to apply to the RMD for that year. Therefore, if a portion is withdrawn it will count toward the first year RMD. But if none is withdrawn, because the RBD is 4/1 of the following year, that is OK but the entire first year RMD must be taken out no later than 4/1 of the second year. Taking part the first year just means you have less to take out by 4/1. Since IRS Regs do not fuse the two concepts in a single statement, both provisions must be considered in determining that the first RMD can be split between years. No where does it infer that if you take out less than 100% in the first year, it will NOT count toward that RMD, since any distribution taken in the first year is applied to the RMD. This is why you cannot convert to a Roth prior to taking out your RMD for the conversion year.

 



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