RMD-Turning 70.5 and 71 same year
Client was 70.5 yrs old in Feb. 2008 and will be 71 in August. What are the rules for RMD and max time before she must withdraw? I am not sure her CPA knows.
Client was 70.5 yrs old in Feb. 2008 and will be 71 in August. What are the rules for RMD and max time before she must withdraw? I am not sure her CPA knows.
Permalink Submitted by Alan Spross on Thu, 2008-07-17 19:45
2008 is her first distribution year, but for her first distribution year only she can defer to RMD up to 4/1/09. If she does that, she will need to take two RMDs in 2009, this year’s and the 2009 RMD.
The RMD for 2008 is based on her 12/31/07 balance and a divisor of 26.5 from Table III since she hits 71 this year. For 2009, she will use the 12/31/08 balance and a divisor of 25.6.
One possible disadvantage of waiting until next year is the effect of two distributions in 2009 inflating her marginal tax rate for that year. However, in certain cases there may be an advantage to waiting.
Note: If client’s spouse is more than 10 years younger and the sole beneficiary of her IRA, then Table II applies instead of the above divisors. Her RMD would be lower.
Permalink Submitted by Al Fry on Fri, 2008-07-18 01:32
One other disadvantage of waiting (although very minor) is that the 2009 RMD would be based on the 12.31.08 balance, which would still include the 2008 RMD amount.