RMD Question
Hi –
Technical question on RMD’s…
Client turned 70 1/2 on 6/28/08….He needs to take his first RMD before year end…
With that being the case, do I calculate using the Age 70 divisor of 27.4 ? Then next year, technically for the purposes of his RMD, do I skip the Age 71 divisor (26.5) and use the Age 72 divisor, being that he is 72 years of age in the year that the distribution is being taken ?
Thanks
Gregg G
Permalink Submitted by Alan Spross on Mon, 2008-12-08 21:19
Gregg,
No, for the 2008 RMD, you use age 71 because he will reach 71 before the end of the year, ie 12/28/08. Also, client does not really have to take his first RMD until the required beginning date of 4/1/2009. If he delays it until 2009, the amount of the RMD does not change, but it will be taxable in 2009 instead of 2008 – and he 2009 RMD will also be taxable in 2009. Therefore, you need to decide which year is best for the client to take the RMD tax wise. And to make this even more interesting, Congress may pass relief with respect to 2009 RMDs.
The 2009 divisor will be based on age 72 since he will reach 72 just before year end, as you indicated.
Permalink Submitted by Gregg Guiol on Tue, 2008-12-09 14:04
Alan –
Manys thanks for the quick response…
One quick clarification however…Being that the clients 70 1/2 birthdate fell within the first six months of 2008 (6/28/08) – Isnt he required to take the first years RMD this year (2008) –
I thought the rule worked like this, if the clients 70 1/2 birthdate landed prior to July 1, then it had to be done within that calendar year and if it landed on or after July 1, then the client had the choice of deferral into the next tax, thus if chosen, said client would then be required to take 2 distributions within that next year….
Gregg Guiol
Permalink Submitted by Al Fry on Wed, 2008-12-10 16:39
No, the RBD (Required Beginning Date) is always April 1 of the year following age 70 1/2 for IRAs.