RMD turning 70 1/2 and 71 in the same year

Submitted by Pamela Prine on Tue, 2019-05-14 22:02

I stumble with this every time it happens.

Clients turned 70 in Oct 2018.

Client turns 70 1/2 in April 2019. That RMD is due 04/01/2020 – calulated from the Dec 2018 or Dec 2019 balances?? If client takes that 70 1/2 initial RMD by 04/01/2020 – does she also have to take a distribution by Dec 31, 2019 calculated from the Dec 31 2018 balances because she turned 71 in 2019??

OR is the 70 1/2 RMD counted as the first RMD and we don’t worry about 71. We would take 2 RMD’s based off the Dec 31 2018 balances – one by April 1st 2020 and another one based off the Dec 31 2018 balance.

IF this same client takes her RMD in the same year she turns 70 1/2 – so in this case she turned 70 1/2 in April 2019 – she can take her 70 1/2 RMD by 12-31-2019 based off the 12-31-2018 balance and her next RMD would be due by 12-31-2020 off the Dec 31, 2019 balance – thus not taking two in the same year.

Does the 70 1/2 RMD count for the 71 RMD if the client turns 70 1/2 and 71 in the same year??????



Submitted by Alan - IRA critic on Tue, 2019-05-14 22:35

  • The 2019 RMD is calculated using the 12/31/2018 balance and divisor 26.5. The 2020 RMD based on 12/31/2019 balance  and 25.6 divisor must be  distributed by 12/31/2020, therefore if 2019 is deferred there will be 2 years of RMDs taxable in 2020. The 12/2018 balance is only used for the 2019 RMD, regardless of when taken.
  • Reaching 70.5 only determines the first RMD distribution year. A distribution year is the year FOR WHICH an RMD must be taken, even if the actual distribution is deferred to the following April. The divisors for each RMD are always based on the age of the taxpayer’s birthday in that year. In this case, taxpayer will be 71 in the first RMD distribution year so will use the age 71 divisor of 26.5 to calculate that RMD whether the actual distribution is delayed or not. 
  • Fortunately, after the first year things are much simpler. The first year offers one time chance to delay that RMD or part of it, so some tax planning is possible to determine how much of the first RMD should be deferred (if any) in order to produce the lowest possible tax bill for both years combined.

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