Do I Have a Required Distribution From my IRA This Year?

Friday, October 31, 2014

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

We are down to the last two months of the year. It is time for those who have required minimum distributions (RMDs) from a retirement plan to make sure that those distributions are taken. Following is a list of those who have required distributions for the year.

1. Individuals age 70 ½ or older by December 31 of the year

  • If you have an IRA, SEP IRA or SIMPLE IRA, you must take a distribution this year.
  • If you are age 70 ½ this year, you must take a distribution for this year. However, you can delay this first distribution until April 1 of next year. You will also have to take next year’s distribution by the end of next year. It might not be the best idea to double up on distributions in one year.
  • If you have a Roth IRA, there is no required distribution.
  • If you have an employer plan and are no longer working for the company, you must take a distribution from that plan this year.
  • If you are age 70 ½ or older this year, are still working, do not own more than 5% of the company, and if the plan allows, you can delay your first required distribution until the year you separate from service.
     

2. Individuals who have set up a 72(t) distribution plan

  • If you are under the age of 59 ½ and have set up a 72(t) distribution plan to avoid the 10% early distribution penalty, you must take your full distribution amount before the end of the year.
     

3. Beneficiaries of all retirement accounts

  • Non-spouse beneficiaries of retirement accounts must begin taking RMDs in the year after the account owner’s death, regardless of their age. Roth IRA beneficiaries also have RMDs beginning in the year after the account owner’s death.
  • Spousal beneficiaries do not have an RMD until the account owner would have been age 70 ½. If the account owner was age 70 ½ or older in the year of death, RMDs for a spousal beneficiary will begin in the year after the account owner’s death.
     

4. Deceased account owners

  • Yes, that’s right, deceased account owners. If the account owner died after April 1 of the year they turned age 70 ½, they have an RMD for the year of death. That RMD must be taken by the beneficiary that inherited the retirement account. The RMD does NOT go on the decedent’s tax return and it does not go to the estate, unless the estate is the beneficiary.

 

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