rmd at 70 or 71 factor

Submitted by Douglas Bauerband on Mon, 2013-12-02 16:26

clients birthdate is 10/1942. He turned 70 and 71 this year.

a. am I correct in stating he can take his rmd for 2013 by 4-1-14 and use the 71 factor even though he will be 72 in 2014?

b. but it he takes it this year, do we use the 70 factor or 71 factor?

c. I know he will have to take his 2014 rmd by 12-31-14, but since he will be 72, do we take the 71 factor or the 72 factor?

Thank you,
Douglas

Permalink Submitted by Alan - IRA critic on Mon, 2013-12-02 17:24

a) That is correct. The 2013 RMD divisor is 26.5
b) If taken this year, the divisor is still 26.5 because he will be 71 on 12/31/2013
c) 2014 RMD will use the age 72 divisor of 25.6. Note that if he does not take the 2013 RMD in 2013, the 12/31/2013 balance will be larger and will increase his 2014 RMD by around 3.7%.
Sometimes due to SS taxation and other factors, client can save on total taxes for 2013 and 2014 by taking PART of his 2013 RMD this year and the rest prior to 4/1/2014. Client would have to experiment with a tax program to see which combination will likely produce the lowest tax total, and to do this he would have to have a good idea of his taxable income in both years.