Your Age 70 1/2 RMD Required Beginning Date

Tuesday, March 25, 2014

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

If you were age 70 ½ last year (in 2013), April 1, 2014 is an important deadline for taking your 2013 IRA required minimum distribution (RMD). The tax code refers to this April 1st deadline as your required beginning date (RBD).

The year you turn age 70 ½ is the year you must start taking RMDs from your IRA. This rule applies to all of your traditional IRAs, including any SEP or SIMPLE IRAs. It doesn’t matter if you’re still working; your RBD for your IRA is still April 1 after the year you turn age 70 ½. If you have any Roth IRAs, you don’t have to ever take an RMD from your Roth IRAs.

According to IRS rules, you turn age 70 ½ six months after your 70th birthday. So let’s say you were age 70 ½ last year. That means that 2013 is the first year you must take an RMD. However, the deadline for actually taking your age 70 ½ year IRA RMD is April 1 of the following year (April 1, 2014). All RMDs for years after the 70 ½ year must be taken by December 31st of that year.

In other words, it’s only the RMD for your age 70 ½ year that can be delayed until April 1st of the next year. If you were age 70 ½ last year and you didn’t take your 2013 RMD in 2013, then you’ll have to take two RMDs in 2014. Your 2013 RMD must be taken by April 1, 2014 and your 2014 RMD needs to be taken by December 31, 2014. If you take two RMDs in 2014, you’ll be taxed on both of them for 2014.

If you don’t take your IRA RMD by this deadline, or you don’t take enough of it by then, you’ll be hit with a 50 % penalty. For example, if your RMD for 2013 was $1,000 and you didn’t take any of it by April 1, 2014, then the penalty is $500 ($1,000 shortfall times 50% equals $500 penalty). Or, let’s say instead that you took $800 of your $1,000 RMD for 2013 by April 1, 2014, then your penalty would be $100 ($200 shortfall times 50% penalty equals $100 penalty).

 

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