What is the reasoning behind the half year rule for ages 55 1/2 and 70 1/2?
What is the reasoning behind the half year rule for ages 55 1/2 and 70 1/2? Why not just age 55 or 70?
What is the reasoning behind the half year rule for ages 55 1/2 and 70 1/2? Why not just age 55 or 70?
Permalink Submitted by Alan - IRA critic on Tue, 2018-07-10 17:40
There is no 55 1/2 rule. The separation from service exception applies to separations that occur in the year the participant turns 55 or later, and that means some of these people are only 54 upon separation and still qualify because they will reach 55 by year end.
With respect to the RMD beginning date being determined by the year 70.5 is attained, perhaps the logic behind this is to reduce the affect of the DOB on RMDs by 50%. Using the half year results in those who must start RMDs a year sooner (birthday in first half of year), using age 70 to calculate the RMD, and those with DOBs in second half of the year who start RMDs a year later using age 71. So start RMDs sooner, the RMDs are smaller (use age 70), but RMDs are larger for those that start a year later.
Permalink Submitted by Byrke Sestok on Tue, 2018-07-10 18:12
I actually made a double typo without looking at my keyboard. I meant 59 1/2. I’d certainly love to know the correct reasoning beyond your supposition , which seems valid.