Required minimum distributions (RMDs) are an important part of retirement. Calculating them across one or multiple retirement accounts can be complicated and, if not done properly, can result in tax penalties.
Here’s what you need to know:
- For some types of retirement accounts—including IRAs and 403(b)s—you can combine the total RMD amount from all of your accounts and withdraw that amount from one or more accounts. For others—such as 401(k) and 457(b)—you must withdraw the RMD from each account separately.
- As the account owner, you’re responsible for taking the correct RMD on time annually. That includes knowing which plans qualify, starting on the correct date, and completing the required IRS worksheet(s).
- Your plan custodian or administrator may calculate the RMD amount. This is done by dividing the prior December 31 balance of the account by a life expectancy provided in the IRS tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
- Your life expectancy is based on your situation:
- Joint and Last Survivor Table—if the sole beneficiary of the account is your spouse who is more than 10 years younger than you
- Uniform Lifetime Table—if your spouse is not your sole beneficiary or is not more than 10 years younger than you
- Single Life Expectancy Table—if you are a beneficiary of an account (an inherited IRA)
If this sounds complex, that’s because it is—but it doesn’t have to be. If you’d like to learn about ways to reduce or eliminate the burden of calculating RMDs yourself, contact the office to discuss your options.