RMD
Hello,
I have a client whose DOB is 04/15/1945. Accordingly, he turns 70 1/2 this year (2015) and would need to take his first RMD by April 1, 2016. His wife is a few years younger than him (<10).
My question is, if he decides to not take his first RMD until 2016 (with a 2nd RMD being required by 12/31/16), is the first RMD (due by April 1, 2016) based upon a 27.4 divisor per the Uniform Lifetime Table, with the second RMD (due by Dec. 31, 2016) based upon a 26.5 divisor?
Please confirm/clarify if incorrect at your convenience. Thanks! Jason
Permalink Submitted by Alan - IRA critic on Mon, 2015-10-12 19:37
Jason, you are correct. 27.4 for 2015 RMD and 26.5 for 2016 RMD. And since 2002, there is no longer any adjustment made to the 12/31/2015 balance due to the 2015 RMD being deferred to 2016. The actual balance is used, so deferring the 2015 RMD to 2016 will result in the 12/31/2015 balance being larger and that will make the 2016 RMD about 3.7% higher.
Permalink Submitted by Jason Hochstadt on Tue, 2015-10-13 13:46
Hi Alan, Thanks for the reply. I understand your point that, by not taking the RMD this year, not only will 2 RMDs be required next year but the 2nd RMD (due by 12/31/16) will be inflated by around 3.7% (100 / 27.4) by virtue of not having taken the initial RMD in 2015 when the client turned 70 1/2. Appreciate your help.
Permalink Submitted by Jason Hochstadt on Mon, 2015-10-19 21:52
Hi Alan, With respect to the above scenario, the 1st RMD (whether taken in 2015 or by April 1, 2016) will be based upon the 12/31/14 value and age 70 (27.4 divisor), with the 2nd RMD taken in 2016 based upon the 12/31/15 value and age 71 (26.4 divisor).Would anything change in this regard had the client turned 70 in 2014 and 70 1/2 in 2015 (e.g. would the Uniform Table distribution period for the 1st RMD, to be taken in 2015 or by April 1, 2016, be 26.5 rather than 27.4?Thanks. Jason
Permalink Submitted by Alan - IRA critic on Mon, 2015-10-19 22:04
If the DOB is in the first 6 months of the year, then the first RMD divisor will be 27.4. If the DOB is in the last 6 months of the year, the first RMD divisor is 26.5, but the first year RMD will be one year later than a person with DOB in first 6 months since they will not reach 70.5 until the following year.