Initial RMD

Submitted by Jason Hochstadt on Wed, 2017-02-22 16:29

Hello,

Husband and wife are clients. Husband is turning 72 this year (has already begun taking RMD’s since 2015) and wife turns 70 this year (DOB 03/25/1947). Wife can take her initial RMD either in 2017 or else by April 1, 2018.

Couple is not in a high tax bracket (as per accountant, effective rates of 14% Federal and 5% NY State in 2015 which was projected for 2016). Husband’s 2017 RMD totals $30,508. Wife’s IRAs are relatively small, at $33,248 combined, so her initial RMD would be $1,213.42.

Question: To the extent wife does not take the RMD in 2017, but delays until as late as April 1, 2018, do we still use the 12/31/16 ending account balances for her IRAs (as opposed to the 12/31/17 ending account balances)? Also, would we use 27.4 as the distribution period/divisor (as would be the case this year), OR else 26.5 if the initial RMD is taken in 2018 since next year the wife will be turning 61?

Please advise. Thank you!

Jason



Submitted by Alan - IRA critic on Wed, 2017-02-22 16:51

  • The wife would use the 12/31/2016 IRA balance for her 2017 RMD whether she takes it in 2017 or 2018. For her 2018 RMD she would use the 12/31/2017 balance. That balance is no longer adjusted for the effect of not having taken out the 2017 RMD in 2017 if that happens.
  • Wife uses a divisor of 27.4 for her 2017 RMD regardless of when distributed, and 26.5 for her 2018 RMD.
  • Put another way, the option to delay only changes the tax year in which the RMD is reported. It does not change the calculation of the RMD amount in any way.

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