Permalink Submitted by Alan - IRA critic on Sat, 2025-05-03 18:12
Most employees who think they retired on Jan 1 are taken off the company books on 12/31, which would make 2024 the first RMD year with that RMD due by 4/1/2025. If the plan has not distributed that RMD, it is possible that client was still on the books as active in January. In this latter case, 2025 would be the first RMD year with the deadline to take that RMD being 4/1/2026, but the client should then take the RMD this year to avoid having to take 2 RMDs in 2026.
Jan 1 retirement dates are always confusing, so the client needs to clarify with the plan exactly which year is the first RMD year.
Permalink Submitted by Richard Schieb jr on Sun, 2025-05-04 13:05
Alan, if his retirement was in fact January 1, 2025, why would his first RMD be April 1, 2016?
Why wouldn’t it be like any other RMD and his first year for RMD being 2026 and he would have until December 31,2026 to take it or to wait until April 1, 2027
Permalink Submitted by Alan - IRA critic on Sun, 2025-05-04 13:55
The first RMD year always has an associated “RBD” which stands for “required beginning date” and is always 4/1 of the year following the first RMD distribution year.
If the company treats the retirement as being effective in 2025, then 2025 is the first RMD distribution year, but that RMD can be delayed to as late as 4/1/2026.
But if the company treats the retirement as being effective in 2024 because the client never worked in 2025, then 2024 will be the first RMD distribution year with an RBD of 4/1/2025. In that case, the plan should have distributed the 2024 RMD before 4/1/2025, and if they did not it may indicate that they are treated the retirement as being effective in 2025.
As indicated, a 1/1 retirement date is problematic with respect to RMDs because companies may handle this differently. To be sure, the client needs to contact the plan and find out exactly when the plan no longer considered the client to be an active employee. Once that is determined, the above rules will apply.
Permalink Submitted by Richard Schieb jr on Sun, 2025-05-04 14:30
Alan,
The paperwork from John Hancock indicates a January 1, 2025 termination date, so I would think he has until April 1, 2027 to take his first distribution if he wants to delay it.
Permalink Submitted by Alan - IRA critic on Sun, 2025-05-04 18:02
If the retirement is in 2025, then an RMD is due for 2025. That RMD could be delayed until 4/1/2026, but if so there would be two RMDs due in 2026, the 2025 RMD due by 4/1/2026 and the 2026 RMD due by 12/31/2026.
To be clear, the first RMD is for the year of retirement, not the following year.
Permalink Submitted by Alan - IRA critic on Sat, 2025-05-03 18:12
Most employees who think they retired on Jan 1 are taken off the company books on 12/31, which would make 2024 the first RMD year with that RMD due by 4/1/2025. If the plan has not distributed that RMD, it is possible that client was still on the books as active in January. In this latter case, 2025 would be the first RMD year with the deadline to take that RMD being 4/1/2026, but the client should then take the RMD this year to avoid having to take 2 RMDs in 2026.
Jan 1 retirement dates are always confusing, so the client needs to clarify with the plan exactly which year is the first RMD year.
Permalink Submitted by Richard Schieb jr on Sun, 2025-05-04 13:05
Alan, if his retirement was in fact January 1, 2025, why would his first RMD be April 1, 2016?
Why wouldn’t it be like any other RMD and his first year for RMD being 2026 and he would have until December 31,2026 to take it or to wait until April 1, 2027
Permalink Submitted by Alan - IRA critic on Sun, 2025-05-04 13:55
The first RMD year always has an associated “RBD” which stands for “required beginning date” and is always 4/1 of the year following the first RMD distribution year.
If the company treats the retirement as being effective in 2025, then 2025 is the first RMD distribution year, but that RMD can be delayed to as late as 4/1/2026.
But if the company treats the retirement as being effective in 2024 because the client never worked in 2025, then 2024 will be the first RMD distribution year with an RBD of 4/1/2025. In that case, the plan should have distributed the 2024 RMD before 4/1/2025, and if they did not it may indicate that they are treated the retirement as being effective in 2025.
As indicated, a 1/1 retirement date is problematic with respect to RMDs because companies may handle this differently. To be sure, the client needs to contact the plan and find out exactly when the plan no longer considered the client to be an active employee. Once that is determined, the above rules will apply.
Permalink Submitted by Richard Schieb jr on Sun, 2025-05-04 14:30
Alan,
The paperwork from John Hancock indicates a January 1, 2025 termination date, so I would think he has until April 1, 2027 to take his first distribution if he wants to delay it.
Rick
Permalink Submitted by Alan - IRA critic on Sun, 2025-05-04 14:56
That would be 4/1/2026, not 4/1/2027.
Permalink Submitted by Richard Schieb jr on Sun, 2025-05-04 17:26
No first year would be 2026 so either December 31,2026 or delayed to April 1, 2027
Permalink Submitted by Alan - IRA critic on Sun, 2025-05-04 18:02
If the retirement is in 2025, then an RMD is due for 2025. That RMD could be delayed until 4/1/2026, but if so there would be two RMDs due in 2026, the 2025 RMD due by 4/1/2026 and the 2026 RMD due by 12/31/2026.
To be clear, the first RMD is for the year of retirement, not the following year.