Distribution Rules, Alternatives And Taxation - Retirement Rules
Retirement plan participants must follow specific requirements to avoid a penalty for withdrawing an insufficient amount.
- 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.
- 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.
- RMD not Eligible for Rollover – RMD amounts are not eligible for rollover treatment.