CFP

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Distribution Rules, Alternatives And Taxation - Retirement Rules

Retirement Rules
Retirement plan participants must follow specific requirements to avoid a penalty for withdrawing an insufficient amount.  

  1. Required Beginning Date – This is the date by which a retirement plan participant must begin taking the RMDs. Generally, the date is April 1 of the calendar year after reaching the age of 70.5.
    • First-Year Distributions – If the plan participant waits until the first three months of the year after turning age 70.5 to make a RMD, then during that year two RMDs must be made. In subsequent years, just one distribution would be required.
    • Death of IRA Owner – If an IRA owner dies after reaching the age of 70.5 but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date.
  2. Delaying the Required Beginning Date – A participant in an employer-sponsored retirement plan who continues working past the age of 70.5 may delay the required beginning date until April 1 of the year after they retire.
    • Rules for this delay:
    • More than 5% of the owners of an employer are not eligible for this treatment.
    • The delay applies only to the plan of the current employer, not previous employers.
    • Plan sponsors have the option of mandating the regular required beginning date be followed.
  3. RMD not Eligible for Rollover – RMD amounts are not eligible for rollover treatment.
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